Anglo American plc (AAL) Earnings Call Transcript & Summary

Okay. Good morning. Good afternoon, and welcome, everybody, and thank you for joining us today for the second of our sustainability performance updates for 2021. Well, next slide, please. For those that are avid readers of legal documents, we've got 1 here for you. Preferably, we'd like you to read it in your own time. Next slide, please, Rob. The order of play today is I will provide the update on our ESG performance, and then I will talk to the next steps on our climate journey. And hopefully, you will have seen our releases earlier this morning. Jon Samuel, our Head of Responsible Business partnerships, and he leads our socioeconomic development work will talk to a very different approach we're taking to supporting livelihoods in our host communities and countries. We believe this approach is well beyond the traditional model for mining and is certainly sharping way we are continuing to develop. Finally, Zahira Quattrocchi, who leads our global tax practice will explain other exciting ways that we're modeling good corporate citizen behaviors trying to be a trusted partner with our communities, our governments and all of our stakeholders. So next slide, please. Thanks, Rob. So we'll start with health and safety. So again, keep moving it Rob. So let's start with the most important issue we've had to deal with in the course of the lately last 18 months, obviously, COVID and our WeCare program. You've heard us talk about the holistic and coordinated program we had in place since the outset of the pandemic to protect both lives and livelihoods. In many ways, the pandemic has proven more challenging this year than last particularly in those countries where vaccination rollouts have been slow and certainly remain low. So our work this year has been focused on keeping employees and community members safe, making sure that people know their status, so they help us keep everyone safe, while at the same time, we help each other manage the unintended consequences of the pandemic. Mental health and gender-based virus programs have been very important in managing some of these secondary but also very material issues through our communities. And pushing the longer-term solution around vaccinations, both within our operations and in our communities has been a clear part of our work. And in many places, we're actually administering vaccines to both employees and community members. And that's been a very important part of that program. At the same time, we need to bring our business back up to capacity has been a very important part of the measured and carefully managed process throughout the operations, making sure new protocols protect people while COVID remains an issue in society in the broader sets. It's about making sure that we're also making people aware of the issues, making sure we're tackling complacency between the respective ways and to help people move beyond the many unhealthful methodologies and false information that we have circulating around communities and through social media on vaccination. And that's, again, a very important part of the work we're doing. And certainly, in some of our open forums, we've been able to debunk some of the silly stories going around, but there's still a lot of work to be done. So next slide, please, Rob. Now for us, going into the central part of the conversation, which is more specifically our ESG work, you've seen our strategy work before you can go to the next slide, Rob. And needless to say, clearly, ESG is at the heart of our strategy. Our portfolio guides our strategy. And our strategy has 3 interlocking areas -- sorry, our purpose guides our strategy, and our strategy has 3 interlocking areas of endeavor, portfolio, innovation and people. So it's about making sure we've got the right assets. We're making sure we're bringing those assets to account. And you can only do that if you've got the right people doing the right work at the right time. Of relevance -- of most relevance to our discussions today and central to our innovation work is FutureSmart mining, which is, again, our holistic approach to driving competitive transformation. FutureSmart mining is about driving sustainability outcomes through technology and digitalization developing and implementing step innovations to transform how we source, how we mine, process, move and market our products to customers. It's not a new concept. We've been talking about FutureSmart and how we're linking all these key elements together since 2015. And certainly, it's central to our progress around safety and the reduction of our energy, water, social and physical mining footprints. Next slide, please. Thanks, Rob. Our sustainable mining plan addresses the E, the S and the G, although we have our own names reclose to help bring them to life and drive the change we want to see across the organization. We have to make it live for all employees. So the E equals healthy environment. The S equals thriving communities and the G is about being a trusted corporate leader in all of its dimensions. Each term and each conversation has a clear set of stretching goals that we set 3 years ago. And as you would expect, as we improve, we continue to increase the stretch in these targets. This is about making sure we improve and we're covering the right ground and continuing to improve as part of our culture and is a way of doing things across the organization. For our mines to be stay responsible and productive, they need to operate in areas that are thriving. This is where our collaborative regional development, when we talk about areas we're talking about within communities, both in the local sense and on a broader scale, whether it's provincial or in regions. This is where our collaborative regional development approach comes in, which is all about creating collaborative mechanisms that drive economic development that is highly dependent, independent of mining in our house community. So we get together with other mining companies. We get together with other businesses. We look at the infrastructure we each need and try and position those infrastructure so the community has access to and get a broader benefits that they can also develop new commercial opportunities. I should also point out, again, as you would expect, that safety, health, environment and social metrics are embedded in our executive and senior management pay mechanisms both bonuses and long-term incentives, including specifically around emissions and off-site job creation. Next slide, please, Rob? On safety, health and environment, we continue to focus on our improvement journey. We have come a long way. But up to today, we still have more work to do. Looking at safety, while I'm pleased with the progress, which reflects the great work of the elimination of fatalities task force. And in fact, if you go back to 2013, we've reduced fatal incidents by 93%, but we've still got a way to go. And obviously, with the sad loss of Carlos, Gonzalo Rodrigues, at Quellaveco a couple of months ago, it does tell us there are still things that we can do better and certainly, lessons we can learn across the business. And we've certainly working hard to get to that 0. For us, we've had 1 fatal in the last 14 months. That's 1 too many. We can see zero, we can touch it but we're not there yet, and we will continue to work as hard as we can to get there. And more importantly, in the longer term work a lot smarter. In terms of health cases, ongoing improvements in controls and our focus on the elimination of the hazards at source and having a very positive effect and impact across the operations, which is really important to us. So that's exposure to dust, chemicals and other environmental hazards that have immediate potential health impacts. On the environment, no incidents to date, touch wood, again, a good result, and that reflects the work we've done to improve our planning and operating disciplines across the business. When we were in a conversation almost 2 years ago now regarding a couple of upsets in the platinum operation, I pointed to this chart sign, look, -- we've come a long way. We've improved. We've got much more consistency in the operations but we're still not at that level where we want to be. And I think this chart is a good chart, and it's almost a surrogate to our other parts of the business. We're doing better, but we've got more work to do. Next slide, please. So we've also been improving our performance on a broader front and the pandemic is reinforced to the outside of the importance of a mining company's social performance work. We support over 138,000 enterprise development jobs in our local communities. And it's around 200,000 if you factor in the impacts of our local procurement activities. We have ambitious plans as part of the S employee. That's the sustainable mining plan to achieve our 2030 target of supporting 5 jobs outside the mine gate for every job inside the mine gate. And that talks to future of work and other concepts that we understand and are developing to make sure that our workforce and our communities are connected, and we're making a real difference in the communities for the longer term. And looking at female senior management representation, we're making good progress towards our goal of 33% by 2023. We're actually at 28%. We've actually been at 29%. We've had some changes. But again, the direction of travel has been very positive. I certainly expect to hit to 33% by 2023. Finally, last year, we launched our new Social Wave 3.0 program and that is our package of social standards and practices. We're working to fully transition to the new higher bar that we've set, which really is the industry benchmark for community engagement and social performance. In stepping back, you can see our trends of improvement across this range of nonfinancial metrics. And certainly, something that we all talk about on a regular basis within the business, and it certainly defines the approach, the thinking and how important it is to us from a cultural perspective. And we believe the market recognizes these improvements as indicators to how we think and create a resilient and sustainable business. Next slide. Thanks, Rob. Now a quick update on our progress towards sustainable mining plan goals across the board. In some of the more mature areas such as reducing carbon emissions, we have initiatives up and running. In others, its strategies and baselining work is where we're focused at the moment. But on the whole, the major goals are on track. As you would expect, COVID has slowed progress on some interim milestones but the teams are working on ways to catch up, and we remain on track in terms of the overall programs. We are looking at whether there are ways that we can define our goals in a more tailored way to our portfolio as it evolves. This reflects CO2 emissions are addressed globally, water needs are more local. And so we need to think, I think a little more creatively in how we present metrics that represent those local jurisdictional issues in a way that's meaningful to the broader public at our stakeholders. So that's a work in progress. If anyone has thoughts on that, we'd be very open to listen and see if you've got ideas that we could consider. From our point of view, big areas of focus, obviously, Chile water stressed environment, so water scarcity continues to be a major challenge. In the Central Zone in Chile, where Los Bronces is located, it continues to face unprecedented climate conditions with the continuation of the longest route ever recorded and 2021 likely to be the driest year ever recorded. First and foremost, we recognize that freshwater sources must be prioritized for human consumption. And so the work around Los Bronces have really been about identifying new water sources, converting what may have been brackets or other types of water sources to things to sources that we can use. And so there are a whole range of solutions that the team has put together to keep us operating. And we'll need to continue on that work to make sure that we've got capacity for the longer term. It's clear in the longer term, we'll need enhanced water security that will require the construction of desalination capacity. Our focus at the moment is to work collaboratively with our -- with our stakeholders to ensure that whatever solution we proceed with contributes to a better outcome for all. So that's with local businesses where we share water resources, its local communities and on a broader basis in terms of Chile, and that work is currently underway. It's not our intention for us to -- it's not currently our intention to construct a desalination facility as we believe we have appropriate water security. But certainly, I think it will remain in the mix as part of the longer-term options that we're looking at. Our near-term focus is on enhancing water efficiency as well. I think we're up to about 87% recycle of water used in Los Bronces as we speak. And again, we still think we can squeeze a bit more out of the system, so more work to be done there. But we're also looking at new technologies, and we're trialing these technologies in El Soldado, such as course particle recovery, and bulk ore sorting along with other infrastructure investments, and that looks at the use of tailings thickness to improve those efficiencies, and that should help continue improve our access to water. At Collahuasi, we are expecting approval of an AII, which will facilitate this construction of a desalination solution and is expected to commence ramp-up by the end of 2024. This timing will enable a significant reduction of water use from continental sources, which will then be incorporated into our expansion programs for the site for the longer term. Our share of initial investment at Collahuasi is expected to be around $900 million for all desalination pipeline and electricity infrastructure. And importantly, it is modular, allowing us to increase water supply over time as the operation grows. And as you know, the resource has significant potential. The project will provide around 60% of the operations requirements. Current water recycling rates are around 77%. So there's more work we can do on the efficiency side. But at the same time, the guys are doing reasonably well, but we can do a little bit better. Overall, we're happy with the progress on the sustainable mining plan. And as I said, we're running a process to refresh the plan to stay in line with emerging issues which we'll also update you on next year. And again, some learnings through COVID that will incorporate into the new plans. And certainly, I think we'll take another step over the next 12 months in getting better at water right across the business. Next slide, please, Rob. Now to look at the first pillar in our SMP and that is the environment. In April, I said that we were finalizing our work on scope 3 according -- coinciding with the release of our latest climate change report that we published this morning, there are 3 carriers I'd like to highlight from the report. Rob, next slide, please. A key point. Our products enable a sustainable future. Remember, mining has a critical role to play in providing the metals and minerals needed for a low-carbon well, particularly in terms of energy and transport. With our copper, nickel, PGMs, high-quality iron ore and the met coal we produce and the extremely low carbon fertilizer we will produce, which we do think is a game changer, the world cannot transition to a lower carbon future or indeed feed itself. Our transformation of the quality of the portfolio is firmly in line with those trends, that is to improve those trends with the addition of the Woodsmith project and our exit from the last of our thermal coal operations in our most recent portfolio changes. In line with an ever greater proportion of the portfolio supporting the future we all want to see, over 90% of our growth capital each Emarked projects in future enabling products, and that's a really important point to make. So next slide, please, Rob. More specifically and looking at how the -- our Scope 1, Scope 2 carbon emissions evolve over time. Our responsibility to society in our customers is to produce metals and minerals while protecting the environment through efficient and environmentally responsible footprint management. This is the stuff we control direct. Our 30% Scope 1 and 2 reduction target by 2030 targets are clear and our ambition to deliver carbon-neutral production across our operations by 2040 has been articulated very clearly. Our pathway to carbon neutrality is shown. The first steps are around renewable energy, contracts were in place in South America and I will touch on our plans in Southern Africa a little bit later. Then with those plans in place, our FutureSmart mining technologies are key to reducing energy use in an absolute sense thereby increasing efficiency, and this is all about reducing our costs so that we're improving our competitive position, which also provides us with the ability to develop cleaner technologies such as hydrogen haulage, which is all about replacing diesel that we use in the operations. And diesel represents about 17%, 18% of our carbon emission. So again, that's a material step that we need to take to make sure we get to neutrality by 2040. Tackling the challenge of methane emissions in our met coal operations is also very important. You can see the orange section on the slide, what we need to do and what we're working on with industry partners is the way the methane, and we have some promising technology solutions, which we're about to start testing. Finally, if we can't abate emissions from every source, we do see a row of negative emissions technologies, either through nature-based solutions or mineral carbonation. Now I know these things have gotten a lot of the airplane in the last 3 or 4 months. We've been looking at this stuff for about 3 or 4 years. So we've been well into the research and the conversations about what we can do and carbon sequestration in laterites is a good example of those technologies in place. So the guys understand it. We've done work both in De Beers and across Anglo. And certainly, there's some interesting technologies. But what we don't want to do is rely on those technologies to actually get us to carbon neutrality. We're looking at in a broader time frame, looking at those as being additional carbon since. So next slide, please, Rob. So on our hydrogen truck, I've literally just come back from South Africa, I've seen the chassis, I've seen all the moving parts. I've actually been through the building that you can see there. So the pilot project is progressing well. It is in South Africa at Mogalakwena. We -- it's really important to make these points. Firstly, we're not building a trial unit that can run around the car park for 10 or 15 minutes. This is a fully functioning 2-megawatt to full in mind functionality. So it's a fully usable track that is loaded, holes and dumps material at the crusher. It's a 290 tonne capacity unit. It's the real deal. No one has done it yet. This is a third and is at least 2 years ahead of our competitors. That first truck is on site and being built as we speak. As I said, I've just come back from the visit to the site. The guys are working that through. We expect that to be operational early next year. As we put all the pieces together, we do the full early field trials, and we expect it to be functioning, as I said, early next year. The whole -- when we look at the whole truck fleet, we're already looking at the second pilot unit based on what we've learned in building this first unit, but we'll finish the trials off, will then go into the second phase. And then after that, we'd expect to start changing the truck fleets starting around 2024. And we would look to replace our global truck fleet, which is around 400 trucks over the following 10 years. So as our trucks come up for life cycle changes, we would go 10 trucks per time, which includes the electrolyzer unit that goes with those trucks and we progressively implement that change over the 10 years. Now we do expect the technologies and the efficiencies to improve over time as well based on what we've learned through the process based on hearing from those that are further down the track in the automotive sector. And so for us, it's an exciting time. And longer term, we believe this lead configuration is right up there with any fleet configuration in terms of efficiency, unit operating cost, and it really is about being part of the future. It's also a unit that's quite flexible. It's a hybrid hydrogen battery unit, which allows us to be flexible in our stripping, which is the biggest part of our mining costs across the operation. That's where you want that flexibility. And for us, again, this change represents a reduction of 15% of our carbon emissions. And so again, a very important component of the program that we've had to take the lead on because the OEMs positioned to drive this. We've driven it and now they're following that. That's good news. Long term, don't need to be a truck manufacturer, but we needed to set a pace of change, and that's what's happened and others and following. And that's good news for the industry. Next slide, please, Rob. In terms of renewable electricity, again, I'd like to make the point that we're not just talking about change, we're doing it. Today, our Scope 2 emissions is about switching to renewables. We've now signed contracts for all of our South American operations. And by the end of next year, we will be 100% South America renewable supply. This will take our renewable electricity from about 36% of total electricity into sites across the globe to about 56% in 2023. So 56% of our input energy main supply energy will be renewable source in 2023. To get the last 44% requires us to think differently, again, in some other jurisdictions, and I'll talk a little bit more about that later. And it does require some investment either from us or third parties. But the interest we've had from third parties and other producers of electricity in those areas in which we'll go, certainly gives us confidence that, one, we can return our investments, we can get a return on our investments and the capital or [ Indiscernible ] capitals will be relatively easy to manage depending on the absolute cost we're chasing and the returns to 1 for the capital that we put into the system. So it is a work in progress, concept and scoping, but certainly, the pathway looks pretty good. And certainly, we believe we're going to be able to wash our face better in terms of capital inputs. And that, from our point of view, is part of that competitive positioning that we see that we think is quite different to our competitors. Next slide, please. Now to give a very specific example of where the bulk of that 44% next step will come from. We talk about Southern -- we talk about Southern Africa. At the moment, -- We don't have the same grid systems that we've got in South America in terms of high-grade supply. So we've got to create a different grid or be part of a different end through the country, which we then use in Southern Africa, so it goes more broadly or more broadly beyond South Africa. The system that we're talking about involves wind power, solar and other technologies that would provide us with energy in absolute terms to supply all of our sites, but we would wheel some of that energy through the South African grid. So we'd have some inside the fence which we would use and dedicate to production of our operations locally, but we would also use that capacity to produce hydrogen. And we also use our deep underground mines that store water, and we use that water basically as a battery where we pump the water up when we've got excess renewable power and allow that water to run back down. So it effectively becomes a battery that system from the work our teams have done would actually reduce our storage capacity, which is important as it goes with the renewable approach by around 50% compared to lithium batteries or even hydrogen store. So it's a really smart solution based on the physical assets that we've got in the country that are underutilized and provides us with a really cost-effective solution the whole South African package. So again, Tony and the team have been working hard on smart solutions that improves our competitive position while delivering carbon-neutral operations by 2040. And that's what the team has been working on over the last 5 years. So we've prioritized South Africa, 75% of our remaining Scope 2 emissions, which comes from South Africa. And so that's why this is such an important project given that we've already done or we will have 56% of the renewable supply in place by 2023. It also supports South Africa's commitment to Paris and contributing to just transition. So again, it ticks all of the boxes for ourselves, for our stakeholders, for the countries in which we work and it's a better outcome because ultimately, we think those hydrogen networks can be used in our broader community. So a number of things that help us in our whole sustainability strategy. It's a hybrid project. It does involve investment inside and outside the gate. So the exact mix will be designed up over the next 18 months, but we're very excited. It certainly looks like a good investment. And from our point of view, is a genuine operations improvement opportunity. It's a genuine economic opportunity. And the good news is it's a sustainable project. So again, through Tony and the guys we've really come up with some smart ideas on that front. Next slide, please, Rob. So getting to Scope 1, Scope 2 carbon neutrality we've got pathways. We've got plans, we've got the projects. We know how to get there, and we're in process. And as I said, we're already at 36% renewables moving to 56%. We're not talking about it. We're actually doing it. Consistent with that approach, we've been working on the Scope 3 emissions conversation, a very important part of the story, and you would have seen our emission targets that we set out this morning in our releases. It is different to Scope 1 and 2. So the way we think about it has to be different, too. Now Scope 3 is always the Scope 1 of another enterprise, so we cannot directly control it. But we do have and have done a lot of work to understand it, which is then the key to being able to influence it. There is a detailed inventory in the climate report of our 115 million tonnes of greenhouse gases, then our Scope 3 emissions, but a few things do need to be pointed out. While the greenhouse gas protocol provides a framework to measure Scope 3, there is a significant scope for interpretation and companies have developed different methods appropriate for them to understand the carbon intensity of their value chain and how they'll track the reduction in that intensity. Our approach builds on our 2019 disclosure and reduces double counting as much as possible. So we're attributing our emissions into met coal and iron ore in producing a tonne of steel. So we're trying to get that balance right, make sure we're not double counting those numbers. And so that gives us more confidence that the targets we're setting are, in fact, real and can be looked at in the context of the broader emissions conversation. And it does provide us with the tracking of the effectiveness of our solutions as well. So it achieves both outcomes. We'll come to any more detail and this will be expected -- as this would have been expected, but it's also worth noting that 77% of that 115 million tonnes is related to the steel value chain. That's not a surprise. It's a statement of what the numbers are. And so that's where the real focus is in making sure that we're influencing downstream outcomes. Next slide, please, Rob. So as you've heard, the announcement today, we're reducing our Scope 3 emissions by around 50% by 2040 on the baseline that we've laid out. We're confident that we can deliver the ambition. And if the steel industry is able to decarbonize in line with the 1.5-degree target, that's the Paris Aline trajectory, we believe that we could reduce our Scope 3 by as much as 80% by 2040. And because certainly, from our point of view, with the high-quality products that we produce those products are valued and would be priority feed for green steel applications, and that's how we're thinking about the contributions we can make both now and in the medium to longer term. And we become part of the long-term green steel solution. Our baseline excludes the thermal coal operations that we've demerged this year. So you can see it on the chart there, but we're putting it there to show you the trajectory that we have from where we were in 2020 to where we'd be in 2030. The light blue area actually reflects growth in the business. So as we're driving and growing copper production, nickel production and those products that will actually help drive the transition. So that's what the world needs. We are continuing to improve -- to reduce the intensity of our production. And so that increase you see to 2030 has been mitigated by the efficiencies that we've delivered. And then we track down very aggressively through 2040 based on those efficiencies applied against those volumes in the following 10 years. So it really doesn't reflect how hard we're working in that first 10 years, 2020 to 2030, but we are building and growing the business, and we're building and growing those materials that are needed to drive the energy transition in any case. So I think that's a really important point to make. And certainly, from our point of view, it shows how we are in different dimensions driving real change and providing the products that will help drive the broader transition. If we were to take those incremental products back in terms of credit, then obviously, our 2030 number would look far lower. If we took the credits back for where copper and that was being used in other applications, but that will be a conversation for another day, and we'll get that tuning over the next couple of years. Next slide, please, Rob. Okay. We have 3 primary levers to pull to help us deliver our reduction ambition. First, our portfolio composition, especially the quality of the products we supply high-quality iron ore from Minas-Rio encumbers well suited to be used as DRI pellet feed, DRI is already a more carbon efficient means of producing and coupled with renewable power and then ultimately, hydrogen is a pathway to green steel. We're well placed to serve that market. We're also going to work with our customers to ensure we're always innovating to provide the best products associated with their need for efficient production. And that's an ongoing improvement journey. Now met coal is also high-quality met coal, hard coking coal. So it brings emission benefits in terms of blast furnace efficiency. That's obviously key in the short term, Longer term, met coal will be transitioned out of the steel mix, but we expect that to be more like 2040 and certainly with our resources and reserves, our long-term life would also correspond to that transition. So we think that's a consistent mix with the broader targets in reducing Scope 3 emissions. Second, as with others, we're forming partnerships to support our customers' efforts to decarbonize. And finally, we've set ourselves the ambition of achieving carbon neutral, a controlled ocean freight by 2040 as well. So again, working on a number of fronts, the technical team, the operations team and our marketing teams are all in there, making sure that we reduce our carbon footprint across the board. Next slide, please, Rob. Now in talking about or contributing to the just transition, the other element that we talk to is how we connect with communities and other stakeholders to make sure that the transition is being managed in a just way. We thought carefully about the just transition together with the council for inclusive capitalism. And we brought our expertise, experience and expertise in social performance, including the collaborative regional development model together with our approach to mine closure to the issue. Essentially, the Just transition is a form of social economic development and needs to be considered as such. And again, Jon and the team we've done fantastic work in making sure that we think short, medium, longer term in terms of how we're transitioning and providing new opportunities for our communities such that we're leaving -- for those areas where we're leaving, we're leaving a positive footprint to work with to provide other commercial opportunities in those communities. Now Jon will talk -- we'll talk to that in just a moment. Next slide, please, Rob. So to recap on climate change and if you look at the top and then the second row of initiatives, to deliver on our initial carbon emission strategy, we have targets -- we delivered on our initial emission reduction targets 1 year early. That's a positive outcome. We're on track to hit carbon neutral for scopes 1 and 2 by 2040, aided by our plans for South African renewables in that strategy. We've stretched ourselves to go further now with a 50% reduction in ambition for Scope 3. We're thinking about climate in an Inconnected way -- into an interconnected way, including in relation to biodiversity, but also within the context of the Just transition. Next slide, please. So with that, I'll hand across to Jon. John, were in your hands.

Thanks very much, Mark. And as Mark said, I'm going to talk a little bit about the livelihoods work that we do in Anglo American. And it's obviously relevant to many of the challenges we face that Just transition as Mark has mentioned, it's also really relevant at the moment in terms of supporting COVID recovery in our host communities, it's relevant to the debate about automation. And of course, the expectations that our host communities and countries have for economic benefits from mining operators as well. And I think it's important to say, we see this as a source of competitive advantage and increasing advantage for us, given where we expect future mines to be developed, which has predominantly non-OECD locations. And it's something we've thought about for a long time. We're obviously not going to read every word on this slide, but our founder roles Oppenheimer was talking about the contribution of mining to host communities and countries back in 1950s. We had our first professional social investment function established in the early '70s, our first enterprise and supply development function focused on black South Africans in the late '80s. And that innovation and codification of what we're doing in professionalization is carried through to this day. And as Mark mentioned, we have significant stretch goals in the sustainable mining plan on education, health and livelihoods and we have livelihoods as part of our long-term incentive plan structure as of this year. So next slide, please, Rob. So to help us reached this much higher level of ambition that we've set out. We've developed something we call collaborative regional development or CRD for short. And what this is really trying to do is move away from isolated one-off projects to much larger, longer-term interventions that support broad economic diversification in the regions where we operate. We did it at the regional, not at the neighborhood level. And as you can see, there are some key features that we apply. So firstly, governments obviously do development planning, but we think we can bring something with a business approach as well to complement that and to build on that. Secondly, this deep engagement with stakeholders to understand what their aspirations are. Then we also back that up with rigorous data analysis for the region. So for example, we will look at things like climate, soils, infrastructure, skills, we will look at tourism and environmental resources and so on. Strong build a holistic picture of that region. And then from that, we can identify what are the untapped opportunities? Arbitraries and resources that are not being exploited is the remaining value chain that's really not developed as much as it could be given the demand that exists within the region and further a feel. So we identify the untapped potential. And then we build partnerships and take those projects forward. And importantly, we do that under a multi-stakeholder governance framework. We think it's really important that we, as Anglo-American aren't seen as driving a lot of this. We want many stakeholders to buy in, including, of course, government but also companies, including mining companies as well as NGOs. And then this is all underpinned by rigorous project management cycle. Next slide, please, Rob. And there are a few principles that we're always trying to apply given our particular lens of the business. So firstly, as I mentioned before, we're looking for programmatic interventions big, long-term, scalable. And the reason for that is it allows us to plan much more rigorously evaluate impact and improve more rigorously. And it also allows us to attract the best partners and we see partnerships as really essential both in terms of expertise. So there are many organizations out there that have been doing socioeconomic development work much longer than the mining industry as a whole. Partnerships also bring legitimacy and credibility. And they also bring access to new funding pool to support the interventions we're looking to promote as well. As a company, we always try and bring a productivity lens whether that's supporting the efficiency of small businesses, for example, that we're sporting or other suppliers or whether it's improving the quality of education and health care through supporting existing public service providers by allowing them to be more effective and efficient. And then we're always trying to pull the levers that we have within the company. And the biggest of those is our supply chain, our procurement roughly about $11.5 billion a year. So that's typically about 100x our social investment budget. But we also look at things like the skills within the business, and we've been running out a group-wide skills-based employee volunteering program to tap into some of that expertise, for example. Next slide, please, Rob. Agriculture is just one example of how CID can work out, and it's got to sort of lens itself quite nicely to an illustration of how it works. So one of the things we've identified in many of our host regions is that there are actually much more valuable crops that can be grown than are being grown at the moment. But there's a catch, which is the -- for them to be viable, they need in region processing, but to have been region processing. You need the right volume and quality of feedstock and no one act on their own acting in isolation can actually provide that level of feedstock. So if we work with partners, we think we can bridge that gap and actually bring in the offtake partners to do the processing and then find redo overseas markets. So this is a schematic illustration of a model we're working on in South Africa where it's hard. There will be a commercial firm and that might be on our land or it might be on other partners land. And on that, we will putting the right infrastructure to support high-value agriculture, and we will draw on mine infrastructure, for example, so things like water, power, logistics. And then around that, we will actually allow other participants to use that infrastructure as well. So that might be other farmers, commercial farmers, but it might also be other smallholder farmers. And it could even be people growing small amounts of crops in their backyards as well. Some of the things we're looking at can be literally grown in oil drums, for example, and they could sell their crop to the central processing hub. And by doing this, we believe we can get better value for our land and for other landholders. So there's a commercial win for us potentially. But also, there's lots of jobs we can support, and we can uplift the livelihoods of many thousands of people around our communities in South Africa. To give you a couple of examples, if you go to the next slide, please, Rob. In South America, we've been working with Inter-American Development Bank and TechnoServe, which is specialist NGO that focuses on business solutions to poverty. And we've been working with them in Brazil, Chile and Peru on a project we called beyond extraction. And you can see the targets for that program there. We've actually supported or created almost 5,500 jobs. We actually met the targets in that program, and you can see businesses that participated almost a 1/3 increase in turnover from the expertise they benefited from in the program. And a newer program in Zimbabwe called Takura again, working with TechnoServe, we are planning to support about 600 farmers, almost 2,000 jobs. We're in the second year of the program. We're actually slightly ahead of track despite COVID. And that project, for example, is already exporting fresh produce to the U.K. and the Netherlands, for example. So it doesn't rely on local economies and brings in much needed foreign income. You move to the next slide. So just finally, we don't think that our higher ambition in this space means that we have to massively increase our social investment budget. Social investment has been the traditional way we've supported this work, but we think there are other pools we can draw on. So third-party grants as an example and the beyond extraction partnership, I just mentioned, did secure $2 million of co-funding from the Inter-American Development Bank, for example, which was obviously incredibly welcome. But we see the commercial sources of funding available to support sustainable development is perhaps the most powerful. And to give you 1 example, in South Africa, we're running a pilot on impact investment. And impact investment has been something we've been interested in for some time. And when we looked at that market, what we found was that actually, there's a lot more funding available than there are good projects. So rather than a set of our fund, what we are doing is investing our cash in supporting the identification of businesses that want to receive investment and then their capacitation so that they can actually become investable by the impact funds. And then we've created a network of appropriate impact funds that are interested in the sorts of businesses that operate in the regions where we are located. And the pilot is going very well so further currently about 25 businesses in the pilot. They are looking for almost $90 million worth of investment, and they were -- not every one of those deals will be successful, but if they were, that would be about 5,000 or 6,000 jobs, and it's actually costing us very little in terms of support from our side. So what we're really just paying for is the assessment and the capacity development of the entrepreneurs, and that's not expensive from our point of view. Meanwhile, we will continue to look at pulling the levers we have even harder. So about 80% of our procurement spend is already sourced in our host countries, but we're working to try and get more of that into our host regions as well to support social economic development in those regions, and we will look at other options such as our infrastructure and Mark talked about some of that with the hydrogen economy, for example, as well as further trying to tap into the skills and expertise we have in the business to support house regions. I'll leave it there, and I'll hand over to Zahira, who's now going to talk to some of our sustainable tax work.

Thanks, Jon. Thank you very much. Yes, I wanted to provide an overview of the contribution that we're able to make across the host countries where we operate. And I also wanted to link this with a strong, very strong connection and fundamental connection that we see between tax and ESG. As tax people like data very much, I thought I'd start by taking and taking you through our some of our numbers on our tax and economic contribution as it is shown in our tax and economic contribution report, you have the link to the tax and economic contribution report at the bottom of the slide. And we think it's a very powerful document, a very powerful tool. It fosters real transparency and better engagement and conversation with our stakeholders. And it helps -- really helps explaining the principles and values of our approach to tax. It's not just about numbers. It is really about much, much more. So I really encourage you to go have checked it out if you're interested. We've been publishing it for 7 years now, and we started to do that because there was a wide interest coming from civil society, shareholders -- stakeholders and as countries about critical issues about tax and we wanted to be clear and transparent. And over time, we really improved the level of information that was -- that's actually brought in the tax in economic contribution reported updated to best practice and transformed the way we communicate about tax to be more about information rather than just inundating stakeholders with data. As you can see from the chart, the report last year shows a quite significant economic contribution of more than $25 billion. Of those $25 billion more than $5 million are tax born and collected. So quite huge. We expect a larger contribution this year, very happily so, because we see paying the right tax at the right time and in the right place as a key part of the partnerships that we are -- that we've developed and we continue to develop with our host countries. It is not just about taxes, I was saying. It's about how we continuously contribute to countries throughout the life of the investment. During the discovery phase, we do that through job creation, through collecting taxes on employee wages through local procurement and by paying our own indirect tax. And when we start mining and be profitable, we also make royalty payments and obviously pay corporate income tax. Next slide, please, Rob. Such substantial contribution has to be grounded on accident governance, obviously, and has to be measured against relevant and best practice mattresses because we want to make sure that we keep on striving for continuous improvement and want to be at the forefront of transparency. We think that governance and how we measure sales against the appropriate mattresses are key to continuing that journey. And it's not an easy journey because we recognize the transparency expectation continue to evolve and will continue to evolve. So we really want to stay on top of that evolution and continue to be on the forefront of that evolution. This slide shows 6 key areas which are sourced from the global reporting initiative tax standard from DJSI, Sustainalytics for [ Indiscernible ]. And we try to really stay on top of what are the relevant mattresses for our stakeholders and for ourselves to make sure that we measure our progresses and what we do against those mattresses. We also really try very hard to make positive contribution to ongoing developments. We have created in our organization and tax and sustainability had -- so tax and sustainability organization to make sure that we really thrive and stay on top of this. And we do support our stakeholders and joining the conversation very, very happily like we did when the global reporting initiative set up a consultation and working group to come up with GRI207 tax standard, which sets best practice on tax reporting and of which we are early adopters. And who knows about tax, but generally about sustainability knows that a standard 1 way to look at information and data is actually very, very important to be able to compare apples with apples. We advocate for more and better tax transparency and better tax systems, which foster good tax governance, and that's really, really critical for us. As it sets strong foundations and is brought to life by our tax control framework global rollout that the tax control framework rollout appropriately prioritizes the conversation about tax risk management in the company and ensures the most effective processes and controls are in place in a standardized way throughout the whole organization, making our top management, obviously, sleep better dreams. Next slide, please. Finally, just a quick look on how tax is integrated in a sustainable mining plan. And I would say, not just integrated really embedded in the sustainable mining plan. Because for us, transparency is not just about disclosing information. It's not just about ticking a box. We believe being a trusted corporate leader means embedding Anglo American sustainability driving all that we do and being fearless really about how we engage with others. Wherever we think there are perspective and experiences can help build better tax systems, better tax basis that benefit society and communities where we operate in the long term. Again, it's a partnership that we think about. It's not a taxpayer government type of relation where things are very cold and straightforward. We are relentless advocates for open and transparent relationships between companies and government on tax. Transparency is a way to build trust and align on principles that enables more open conversations. As I mentioned earlier, that's why we're very much involved in consultations and working group on how to build trust with governments and tax authorities. We have many examples, the tax moral conversation at the OECD level, the cooperative compliance as well. We also spend time with tax authorities to help build understanding of the mining business, create capacity there. We did it in South Africa. We're doing it with other tax authorities, and other recent examples involve the royalty conversation in Chile, the global tax concept measure, the OECD is coming up with. And the discussion on tax and green transition, that's really topical at the moment. We're particularly focusing on the carbon border adjustment mechanism the EU is coming up with because that really has a game-changing effects and also creates a level playing field for us. Most important thing is that we're not just reacting to those developments. We're taking a positive role in the discussion to help build solutions that are sustainable for all. And with that, I pass it back to you, Mark. Thank you.

So thank you, farmer Jon, and to Zahira, and a most trusted corporate leader. Thanks, guys. Ladies and gentlemen, Rob, we'll go to the next slide. Just a quick wrap. We'll do a couple of slide wrap and then open it up for questions. Rob, next slide. Thank you. Very simply put, underlying all of these changes is our technical and operations in innovation program. And our vision for longer term, what it can deliver, and this is part of our broader conversation. Tony's team have been working on a broad range of technical and digital solutions that will reduce our energy and carbon footprints our water consumption at our physical footprint. These are double up these work programs double up by delivering operational benefit while also being the key to decarbonizing. So you can take a look at the technical innovations. The team talked about recently in May, and that's worth checking out on our website, very important, and it really does put it all into context. We're also ahead of the curve in building our technical function where many in the industry were cutting there. So back in '15, '16 when we were going through the tough periods, we were building our technical functions with a view to improving our competitive position. And we're starting to see those benefits roll out into the business. And over the next 5 years, both from a competitive positioning perspective and in terms of our sustainability program starting to see the real payoff coming from those investments and the work we've been doing with people over the last 5 or 6 years. Next slide, thanks, Rob. Ultimately, when we go back to the touchstones that are really important for us in terms of what we're here to deliver as a business. We talk about purpose, our reimagining mining to improve people's lives, and I talked about that being the starting point for our strategy work early in the presentation. Effectiveness that is our job is to deliver free cash flow. And for those businesses that can do better than 10% on return on capital employed, that puts you in the top quartile of performance in our industry. It pays for dividends. It pays for reinvestment and pays for improvement in the business. So it does create a virtuous circle. Measuring efficiency, that is return on capital employed is all about making sure that we're creating value with the capital we're installing and the free cash that we do create is not simply a flash in the pan, it's long term sustainable. So that efficiency number, return on capital employed is critical to us. And obviously, our 15% threshold we're up near 20% at the moment fact, it's well beyond 20% of the month. But certainly, we continue to track up and improve. And then ultimately, against our sustainability pillars, safety, environment, safety health environment social performance, people, making sure we've got our talent pipelines, production-based resources that support the production base, our operating cost position -- And ultimately, where we keep our balance sheet and as you probably know, Mr. Balance is here on the call and if we've got any finance conversations, we'd like -- you'd like me to pull out in a bit more total than Stephen is available to answer questions as well. So with that, we'd be more than happy to take some questions. Thanks, Scott.

[Operator Instructions] The first question is from the line of Alain Gabriel from Morgan Stanley.

I have 2 questions from my side, and I'll start with the first one. So based on the origin of your scopes 1 and 2 emissions, it seems that South Africa is by far the most important emitter. This means that if you get South Africa, right, you will go a long way in meeting our targets. However, from your presentation, it seems that energy strategy there will depend on a variety of partners fulfilling their part of the bargain. So how confident are you about the execution and slippage risks there given that you are not in full control of these initiatives? And how do you plan to fund these initiatives in South Africa. And that's the first question.

Yes. Well, firstly, the position we'll have in 2023 is 56% of our renewables will be in place. The big last step, as you correctly point out, or the next big step is obviously South Africa. We have already sat with the government and taken them through the concepts of the wind farms, east and west coast, solar the underground battery concept with water, very supportive of all of those concepts. That's really important. Secondly, I note that in the last few days, Eskom the national energy provider has talked about $30 billion of investment in creating a new energy strategy for the country. And I would expect that they've been thinking long and hard about the proposals we've been putting to them. Again, very excited with the things we've put forward. We've had a number of plays. I shouldn't name them by name who are interested in funding the opportunities, both pension funds infrastructure providers. So I don't think there'll be any shortage of fund. In fact, a lot of them are said to us they don't have enough infrastructure projects to fulfill their investment mandates. So we don't think that that's going to be an issue. And some of the projects will be funded where they're inside the mine gate, for example, let's talk about the 100-megawatt Mogalakwena solar facility most likely will be funded by us. We will then connect that to the underground storage concept, which is a well-known concept in broader energy places. So again, for us, that's a no-brainer in terms of providing us with low energy and low-cost energy, it provides us with more stable power. It helps build a more stable grid across the country. So we are still in concept and scoping phases. And it will be a combination of investments by third parties in running a multiuser facility. So obviously, that implies funding that sits outside or certainly off our balance sheet. But there will also be some investments we'll have on our balance sheet. And getting that mix right is something we're working through. The most important point to make on the funding of that South African leg of the strategy is that it's still subject to the detail, but it certainly washes its phasing gives us a solid economic return. Now if you look at the 56% that we'll have in place by 2023, that will have been more than self-funding. And in fact, we're already deriving net benefits. Stephen, did you want to make a comment on what we're already getting from the renewables we've installed in South America?

Yes. Thanks, Mike. So maybe a couple of points on that and maybe a little bit more broadly, but you've covered it pretty well. In the South American scenario, we really only had 1 cost, and that was when we really paid out some of our existing contracts in Chile, so just under $200 million. And even at that point, which was a couple of years ago and moving into the renewable contracts was very, very positive for us, net present cost value in excess of $0.5 billion even at that stage. If you actually come forward to the day and played into that analysis, current energy prices because a lot of those old contracts were indexed to either coal or natural gas and everyone knows what's happened to those prices in recent times, it would be even more significantly positive. And we're talking hundreds of millions of dollars even just in Chile this year. So I think it's a great example. What we're trying to encourage people to think a little bit differently that these things can be positive economically an NPV value wise as well as good in terms of the transition journey. If we move to South Africa, it's not as easy because not a lot of that same infrastructure exists at the moment. But as Mark said, we'll work with quite a lot of parties you gain indicated there's a lot of interest out there, particularly for these sort of projects that are underpinned by our base load. So I think that's a really exciting opportunity again, exactly what will be inside the gate outside the gate, multiuser, single user still just being refined. But pretty exciting opportunities. And even to give you a gut example in the recent LNG ships that we've committed to. Some of this needs early sponsoring, it doesn't mean we have to use our balance sheet further on these things, and this industry develops and follows than I would expect. In shippings case, there'll be a great pool of LNG and then hopefully, hydrogen ships in due course. And I think it will be the same in South African energy strategy where we may sponsor initially, but it doesn't necessarily mean we have to own these things forever. And that, as Mark said, people are really looking for these sorts of opportunities, and I think that plays well into this space.

I think the important point you gauge with that is we will look at these opportunities, the way we look at our innovation and technology investments on an annual basis as we go forward because these things pay for themselves because of the way we're structured and the way we set the opportunities up. The exact configuration has to be agreed with, obviously, the third-party players that we're working with, but the enthusiasm for what we're talking about is significant, and they want to move quickly. So very exciting. The only 2 areas of our program that we're still looking at that may -- are not yet fully covered in terms of funding. But again, in the scheme of things represent, I think, a relatively low risk in terms of the overall program is the Vedanta methane technologies, which will work over the next 12 months, and then we'll keep people posted on what that looks like And the track work will actually reduce our operating costs through the implementation of the change or if the truck fleet. The question is can you get enough back to fully recover and get an economic return on that transfer, we believe we can. That is not assuming any carbon pricing. If we assume carbon pricing, then we're well and truly in the money. But we're assuming no carbon pricing and these projects all have to watch their own pace. And we're not far off getting to that with the truck proposal. But Tony and the guys are working through that over the next 18 months. And when we come back with final proposals, I think that will look pretty good as well. So we're pretty encouraged. And we think net-net, this is a competitive improvement strategy, which is part of our business improvement strategy for the longer term. Steve, do you have with that?

Yes, Mark, I think the 1 thing with the trucks, obviously, why don't you start to produce hydrogen for use inside the fence that potentially opens up opportunities outside the fence as well, whether that's energy to communities. If you're running the train from mine site to port or why not run that on hydrogen fuel cells, if that's running on hydrogen win, I run the port on hydrogen. And so that network of opportunities built off our base load would really help in terms of overall economics in due course as well.

So from our point of view, we've got a host of people lining up to be part of this, big energy supplies infrastructure providers, pension funds who have mandates in this type of expenditure. We've got the multilaterals looking to put money in. So we don't think there's going to be an issue of is there enough money available. It's who's the best partner? How do we put packages together where we've got synergies. But again, we're well down that track in scoping and the concept work. So we're pretty confident it will stack up pretty well.

Very clear. And my second question is on your spending budget. So clearly, you have your decarbonization CapEx has been typically embedded in your group CapEx guidance as you have always seen it as an integral part of your business and culture. However, some investors are worried that we would see a significant step-up in decarbonization spending like we have seen with some of your peers recently. Are you able to quantify how much you will need to spend through 2030 to meet your Scope 1 and 2 objectives? Any rough estimates would be okay.

Well, firstly, we -- net-net, we spent nothing up to the 56% and the estimates we're working on now. The way to think about it is, if you look at our technology work in the enhancement work that we're doing, and we spend about $300 million to $500 million a year, Stephen. Some of the expenditure will be in those numbers, but there will be additional amounts. But what we'll do is we'll give you a bit more clarity on those issues in December, but it will be a progressive spend. So for example, on hydrogen, we're doing 10 trucks at a time with the electrolyzers. So we'll keep people up to date as we put those in, but we also get net cost benefits. But again, that $300 million to $500 million, yes, that will go up somewhat, but not significant. And so it will be incremental to annualized, and we'll keep people updated and then show them where those returns come back. So it's part of our business improvement program. And I think we'll give you a little bit more color on that in December. But that's the approach. Stephen, did you want to add to that?

Yes, Alain, you probably heard me say this before, but it becomes harder to distinguish as we go forward because a lot of the improvements, particularly some of the technology stuff that Tony has worked on the bulk orders sort is the course part of a recovery, et cetera, just becomes part of the way you do business, and they have their own economically positive case anyway. And so particularly as they move from trial phase to roll they are just part of the business and the capital guidance that we sort of view in front of us. So I'm not sure we're going to be able to in some of the mainstream technology stuff even identify it for you because it will just be part of the capital program, it's good for water, good for energy and good for business. So that sort of stacks up pretty well. As Mark said, in other areas, yes, listen, we'll continue to give you guidance. But as we're looking at the moment, a lot of it has a very positive business case. So some of it may be timing before you recycle, as I mentioned before. But I think we've got a really good story to tell here and thinking about it a bit differently. So it doesn't just become a cost to the business.

Yes. I think I know what Alain scratching out as well. From our point of view, we don't see a major funding hole, if that makes sense, Alain. It's incremental. It's delivering a return because it's part of our whole energy efficiency program, and it's incremental on an annual basis. So some of the names I've seen thrown around for expenditure, but without return, we're nowhere near the size of those numbers in terms of are there any risk? As I said, I think Vedanta Methane is the 1 that I'm still not sure we can get a net return on it, but that's not big in the scheme of things. And on the track, so I think over time, you'll see that's a net contributor to our operating cost performance, so and we'll do that in incremental steps. So I think we're in pretty good shape to be honest.

Mark, even on Vedanta methane marketing, at this stage, a couple of hundred million dollars. And again, that assumes no carbon tax in Australia. And if that was to come in then it's going to be compellingly a positive thing for us to do.

The next question from Izak Rossouw from Barclays.

Two questions from me. Just on your Scope 1 and 2 emission targets by 2040 and then likewise, the Scope 3 target. You obviously mentioned the sort of 3 main areas to bring those reductions on the Scope 3 side. Could you give us a sense of how much of that would just be portfolio sort of assets depleting on both those targets?

Look, Ian, obviously, depletion of assets over that period met coal would be, I'm going to say, around 30% in that range. We can get the exact numbers, but it would be in that range. Now we think that's appropriate because we think by 2040, the world is moving more to green steel of hydrogen. And so our high-quality iron ore would be targeting those particular markets, and that's where we've got a natural advantage. So it would also be targeting those markets to our 50% to 80% reduction takes into account if we get all of our speed so those markets and our reduction is more like 80%. So let's say, 30% of that met coal and then you've got continuing improvements as we allocate products into those markets, that gives you a sense of what we think is quite possible. But it depends on how quickly steel moves. So as we said, we are subject to what our customers do. But if you look at 67% Minas-Rio product versus 58% fines out of the Pilbara, there's a 25% to 30% difference in scope 3 emissions just in those 2 product mixes. So that's why we think that this is got an express ticket, the 67% material. And that's why we think being a niche producer in iron ore helps us get a ticket to the game a lot earlier and helps us get there quicker. But again, we've not banked too much on that. But if we get it all in there, then it goes up to 80% from 50%. So I hope that helps.

Yes. Maybe just so how much we...

One other point I was -- Sorry, I do apologize. One other point I was going to make is that the fact that our new production comes from copper and Woodsmith means the proportion of Scope 3 contributions also is enhanced for us because we're getting more of our new production versus old production in those products. So we get a real shift in our portfolio. So our returns are actually weighted to the low-carbon products as well. So that's a big advantage we get as well. Sorry, I should have said that earlier.

Just what would Kumba be within that? Are you saying 30% would be met coal?

Yes. So the Kumba, the difference in Kumba over time would again be probably around 20%, Steve, and somewhere in that range on the assumption of life where it is. If we extend, and that's what we're hoping to do, if we extend, we'll reset and advise on what those numbers look like. But based on life at this stage, it is in those numbers, but we are trying to extend life of Kumba, obviously, and we bridged it. But again, it's more in the range of about 20%. I think that's about right step.

Okay. Not sure we've provided that level of breakout in the climate change report. But just to pick up on your point, obviously, the high-grade iron ore and even the [ Indiscernible] , et cetera, also really suitable for both modern blast furnaces that operate today, preferred much cleaner, but also then the transition through DRI plans and ultimately through hydrogen fire DRI plants with pellet feed, et cetera. So I think we're pretty well placed overall.

Yes. One thing about lean in use. we use 0.8 of a tonne of met coal in making a ton of steel and we use 1.5 tonnes of iron ore to make a ton of steel. And so the proportion sit in that sort of range with a lot of the carbon obviously coming from met coal. And so that's an important change in our portfolio over that time frame.

Okay. And then just second question, Mark. Obviously, you're talking about the sort of spend requirement in South Africa decarbonization on, particularly on the Scope 2 front. What -- sort of what broad numbers are you talking about in terms of overall gigawatts and capital spend, not necessarily on your balance sheet, but just trying to frame this sort of task.

So we're talking about 3.5 gigawatts. And we -- that is about -- well, that's a bit higher than our total energy consumption. So it gives us the equivalent full renewable input supply. So that's where that number comes from. And the guys who have designed the concepts around the wind solar Northern Cape. It does also take into account that we'll put some solar capacity inside the fence IA Mogalakwena, for example, where we'll use the local underground water store.

I'm just going to jump in. It's a hard 1 answer because it's a moving piece at the moment. I mean you saw South Africa's announcement was yesterday or the day before about the $30 billion to $35 billion on Eskom's announcement, sorry. So how that plays out, what we do as a company inside and outside the fence, what other mining companies or other industries do, how we may do it together. It's a little bit hard to answer precisely. We'll need to use some of the Eskom grid to move power from, say, a wind farm to our location. So it's a little bit hard to answer. I think the 1 thing I would say if we can move both us and the country forward and away from coal-fired power, it's an absolutely fantastic thing for us to be a part of. And I think it can make a fantastic commercial sense for us. Even if you just take account of reliability in the system, we do as a quite a reasonable amount of production, particularly in platinum in terms of outages, et cetera, in terms of stability. Those things can be easily overlooked and are incredibly valuable, if you get those things back into the equation.

There's a fair swing on it, Ian, and that's why we're a bit careful with these numbers because depending on exactly where you install them, Eskom has capacity in place and mean physical capacity in place that we utilize. And so we're being a bit careful with the capital numbers because if it becomes part of the Eskom system, where there's a lot of the physical line wheeling capacity, they would pick that up anyway. So that's why we're both being careful. The key number you want to look at, and you can reflect on in terms of absolute capacity is the 3.5 gigawatts. Does that help?

I think we're about 2% or 3% of the energy demand, something like that in South Africa income.

The number is probably looking forward to 3.5 gigawatts. And as I said, Steve said, Eskom already got a lot of capacity in place that you can piggyback on. And so that's why we're being a bit careful and a good proportion of the capital will probably be third-party anyway. So we're doing our work over the next 12 months just to get that mix right. But either way, we think certainly the capacity that's being built will be self-funding or certainly, we get a good return on that capital, but it depends on -- and then we'll work out who we should put the capital in. So again, we think that's very manageable.

The next question from Myles Allsop from UBS.

Great. Just to clarify a couple of things around Scope 3 emissions. And first of all, with the measurement, so your inventory was 226 million tonnes last year, and you've remeasured it at 115 million and part of that is obviously exit of thermal coal. But then part of it is just a new way of measuring emissions. Could you just confirm, are you now reporting Scope 3 emissions consistently with the peer group, with Rio, BHP, Glencore and so on. Probably Rio and BHP, the prime example is mostly on the higher side. And then just on that Scope 3 number you're talking about, the 50% ambition by 2040. Is you right from what you were just saying that about half of that comes from the end of life to convert and the end of life of some of the coal assets and the other half of the 50% cut comes from sort of transport and other sources.

So thanks. Firstly, in terms of the Scope 3 logic, I know there will be some differences. I'll let you do the comparisons on those differences. What we've tried to do is to be intellectually consistent. So for example, you have met coal, where you've got 0.8 of a tonne of met coal going into a tonne of steel and you've got of 1.5 tonnes of iron ore going into a tonne of steel, others may require more iron ore to go in if they've got lower quality. But let's use those 2 numbers. Previously, we reported 2 tonnes of emissions that steel emissions for that product that goes in to make 1 tonne of steel. So there's a double county. As we said, that's crazy. So what we've done is we've apportioned the emissions to those 2 inputs into the 1 tonne to come up with the true Scope 3 emission. That's a -- it's a simple logic but it was a logic that wasn't -- it was -- we used the parameters that were set out by various industry players back in '17, and we've said no, that's a double count. And the questions we're getting, people are confused if we use that logic. So let's sort that logic out and get that straight. So that's what we've done. We've also included a proportion of trading emissions relative to the economic contribution from what comes from that tonne because most others are including their trading emissions, which is crazy. You've got to have something. And so we put some emissions from our trading activities as well. And we're trying to replicate the financial parameters because, again, we think that's consistent with how the numbers should be accounted. So we're quite open to share that and show you how we got there between the 2 sets of numbers. But it is different to some because many don't include trading, for example, which we had a bit of. Stephen?

Yes. Just a couple of quick points for me. I believe it or not, we actually do talk to some of the other big miners about the methodology and trying to evolve the standards so that we do get elements of consistency and it makes it a bit easier with my finance hat on in like to trying to prepare sets of complex consolidated accounts and then compare them but not have any international accounting standards. So I think the methodology has evolved the visibility and understanding of that methodology has evolved well. We've also reflected more customer-specific data, I think, in our updates here so that again, it's an evolution as we understand, as our customers understand more about their own journey as well in terms of the factors that we use in how we calculate it. So it's a combination. I expect the standards evolve and knowledge improves that it will continue to evolve, and we'll all go with that play and work closely with some of the other major players and the NGOs and institutions that help governance set the standard in this space that will help with all of those.

Yes, we've had pretty good feedback on what we've tried to do on those numbers. So again, as Stephen said, it's an evolution, and we're trying to do that with our colleagues, but I think there's still more work to be done.

And then with the 50% ambition for reduction, is it broadly right half of that comes from the depletion of assets and half of that comes from other sources. Is that the way we should think about it?

I think it's reasonable. Let us do -- we'll do a check on that just to make sure we're right. But it's in the range, I think, Stephen, that would be pretty close to it. I think but we'll do a check for a.

Yes, correct. The steel industry. steel industry itself marked decarbonizing is 1 of the biggest contributors to that on over time. And obviously, that really is probably in the period 2030 to 2040 in combination with, them say, a rundown of met coal lets say that's a good example.

Yes. So met coal is a good that, obviously. Yes.

One last question just on tax and South America. Can you give us a quick update on the risk of higher taxes in Peru and Chile.

You aren't going for it? go for it.

Yes. Listen, you're seeing what I'd call a natural journey in some of these discussions. In terms of evolution. It's gotten a little bit quieter just at the moment in the part of the process that's seen in Chile given elections and other things coming up. we've had a great opportunity to contribute to those discussions. As Zahira said, we try to actively take part in those discussions to make sure that there's a fair outcome for all. I noticed there were some announcements in Peru. I'm not sure if that was overnight or the day before in terms of them raising some of the same questions. Again, we fully respect the rights of countries to work those things through. And I should have heard me on a number of occasions, say that the U.K., particularly this week, has a crack at getting the balance right. The U.S. has had a crack at getting the balance right, and we've seen changes there in corporate income tax, social taxes, spending taxes, et cetera. And I know ,I expect that a number of other countries will work through those things to balance the books over time, mining commodity-based economies tend to go towards mining taxes because it's 1 of the bigger things that can move the needle for them, but sensible discussion, sensible involvement and hopefully sensible outcomes.

Yes, I agree with that.

The next question is from Sylvain Brunet for Exane BNP Paribas.

Two quick ones on the Scope 3 reduction partnerships with steel makers and other providers. Is there any framework you have in mind to select who you're going to partner with? And is there a budget against that? Or is it still too early days to quantify this? And the second question is on Mogalakwena safety, given all the progress you've made already. Or would you say are the remaining geographies where you'd say there is still room for improvement on safety, best practices.

Yes. Look, on the commitment with partners, we've really got a big convince that the partners we go with are working hard on the right things. We've announced 1 -- obviously, we're doing the shipping work. We've announced our steel partnership. Again, we're also looking at those players that we would most likely believe providing product for particularly the high-grade products, given we're in a niche player. So that's really what we're doing. We think the key thing is to have a product that everybody wants and with Minas-Rio, our product, in particular, but Kumba been very good as well at 67% and 64.5%, 3years can you get Kumba up to 65% or better. there are process technologies that we think we can continue to improve. That's with Tony working with Tony and the guys. And we're doing the same at Minas-Rio with our course protocol flotation in those new technologies. And do you take it into different products. So over the next 12 months, I would hope to see a few more announcements on those types of partnerships which look at the whole technical development, where we're giving them better products to help them reduce their Scope 3 emissions. That's the key, and that we think is really important. On safety, Look, there's no doubt that -- well, firstly, in the test rooms the guys have done a great job in the Platinum business. Their safety performance has really improved. They've gone 12 months fatal 3. That's great news in terms of -- we've still got quite a significant amount of the workforce working underground. So we're really pleased with that progress. But we are still having more incidents or more high potential incidents that we would like, particularly around mobile equipment and not doing as good a job as we can on hazard assessment and management. So that's where the focal points are. But we've improved 93%. We've still got a way to go. We're not at 0. Our accident frequency rate has improved 60%. I think we need to do a lot more there. But I would say that COVID has added some pressures and some people may not have been focused on all of the important things in terms of the smaller, less serious injuries, but you've got to work right across the board. So I think we've still got a lot of work to do on our work and task planning to get to 0 and, in particular, the higher potential incidents and still lead a bit more work. So our elimination of tell this task force work is still ongoing and still a lot more work to be done. One other point I was going to make, which does come to mind in the Scope 3 conversation. One thing we've been giving a lot of thought to is beyond Scope 3 and particularly in relation to steel that in our case, we've got about 35 to -- and we'll have over 50% of our energy on renewables. One has to remember that steel makes a significant contribution to renewable energies. And ultimately, there's a net back credit that doesn't get picked up in the Scope 3 conversations. So we're advocates of a much more science-based technically-driven analysis of what the decarbonization strategy looks like and how we should be accountable for making those numbers or making the targets for 2030 and 2040. And so we think over the next couple of years, there's more of a debate to be had in those areas because those contributions are really significant that aren't getting picked up in the debate of demand. Scope 4 it's the next step of thinking because if we can't stop making to or decarbonization doesn't happen, yet steel is getting no credit. So there's some work we think we need to do. We think we've got great product in that industry that gives us an advantage. And I don't think that conversations is sophisticated enough yet. And that goes back to Stephen's point about how we as an industry talk to emissions in a, I think, a more thoughtful and constructive. So I still think over the next 12 to 18 months, a lot more work can be done to make this easier for everybody, and also make those outcomes more transparent. So that's what we're going to focus on and keep trying to improve the conversation as we go forward.

Mark just going to comment very quickly. We've got 2 more questions on the line. So we're just going to take those quickly, and then we'll have to call it on that. Thank you.

We're happy to do that.

The next question is from Oliver Grewcock from Berenberg.

There's been some difficult headlines coming the regarding workplace behavior for some of your peers. Do you think any of your policies or operational behaviors will change with this in mind?

So firstly, I'm not going to talk about other companies and the travails. We still have work to do to make sure that our behaviors in all of our operations are as good as they should be. We really have used some of the news flows to help reinforce our views on the behaviors that we should have within the business. But I can't say that we're 100% where we need to be. And we really are using those incidents and our own incidents to explain to people what our expectations are, and it's a journey. And it's a journey for all organizations and it's a journey for the industry. So we're working as hard as we can. The fact we had our purpose conversation and it was a very deep and meaningful literally conversation over 18 months. So it took us 18 months and consulting 100,000 people has come up with 7 words, but we own those words and then every action that we take has to be consistent with those words. And so I think that place is important. Whenever we see a negative headline or whenever we see a behavior in our business, and we still have behaviors, we're not happy with. We show the mirror or hold the mirror up to ourselves and say, okay, what should we do different? What could we do differently? Let's make sure it can't happen here. We've still got a way to go, but it is a journey. And I've got to say that I'm proud of how far we've come, but we're not where we need to be, and I certainly wouldn't be critical or take cheap shots than anyone else in the industry. I think we're all on the journey, and we're part of that journey. We're trying to get there as quick as we can.

And could you remind us about your engagement with host communities? Do you think there's any risk to the longer-term mine plans at possible change the heritage loss?

Look, we've done a lot of heritage work. I know Minas-Rio, when we had the Minas-Rio project took a long time to get off the starting blocks. And a lot of that work was around heritage, both environmental and indigenous issues. And so I think -- we learned a lot of lessons at Minas-Rio that we've applied back into Mogalakwena. I think we can do a much better job in our community relocations. We haven't done that well in platinum historically. And Natasha and the team are trying to apply those lessons to the future. And that will be important for us in the longer term at Mogalakwena. And I've talked about -- our growth at Mogalakwena will be incremental open cut and deep lines. Longer term, we'll step out and there's work to be done with communities. And so I think we have to be at the leading edge of that work. I don't see any immediate threat. But I think over the next 10 years, we've got to go 5 steps further to make sure we've got all those issues right. But I think the team has done some really good work. But there's more work to be done. And again, I think there's more work for the industry to do because it only takes 1 bad player somewhere to create a bigger issue for all of us. So I think we're all going to be part of that solution. And I think we're working hard on that stuff, and we're working hard on legacy stuff as we should be.

Our last question is from the line of Danielle Chigumira from Berstein

Right on water. So we know that there's a plan to build De Beers capacity at Collahuasi. Could you chat through what makes at the nation at Collahuasi appropriate, but not necessarily for lost process. And again with water in terms of the 50% target reduction in freshwater withdrawals by 2030, is it possible to get to that target with only the Collahuasi desalination and further efficiencies? Or do you need to take more structural step to get to that 50% reduction?

Okay. So let me go to Los Bronces versus Collahuasi. In Los Bronces, we had more access to other water sources that we think is appropriate to work as hard as we can to pick up those water sources first. They are the most cost effective, but also the most constructive from an environmental point of view as well. I'm not saying desals not environmentally friendly. But I'm saying that these are things that we should do first anyway. And then the desal option will come after we've made sure we've got all of those options covered, which included recycle people know that we've been taking the positive water balance from Andina. Those things make sense for everybody. So that's where you go first. We don't have those types of options available to us at Collahuasi. So it's simply about 1 of the right things to do by that location versus Collahuasi, whereas Collahuasi desalination is the most obvious and most cost-effective source to go, albeit we still want to improve our efficiencies as well and looking at new technologies. So that's the simple reason. Sorry, I didn't pick up -- I did -- what was the second question, was that about the desalination plan in fact that take us a Collahuasi. Was that the question?

Yes. So it was just the overall target to reduce fresh water with grows by 50% by 2030. So how you get to that target? So once you've done Collahuasi desal and do further efficiencies, is that enough? Or do you need other structural steps to get to that 50% reduction?

So it takes us a long way there, but it doesn't quite get us there. So that's what Tony and the team are working on now. We're also looking at some of the definitional issues across the organization in terms of what's in abstraction of fresh water. But there's still a bit more work to be done. And again, we'll update next year on our progress. So we're well underway, but not quite there. I couldn't give you -- is it 15% or 20%. It's in that range, but still some more work to be done and whether it means the implementation of the dry tailings work, that's going to be important. And that goes with core particle flotation because we increase the grind size. That allows us then to look at tailings very differently, and that gives us better recirculating load. And we won't have all of our operations with dry tailings by 2030. So the question is, what can you get done by 2030, what might take a little bit longer and what other technologies can you kick in place to get yourself there by 2030. That's the problem we're solving for right now. Does that help?

That's very clear.

Mark, if Danielle is finished, I'm going to call that if I may. So ladies and gentlemen, many thanks for sparing your time. If our coms can help with any follow-ups. And please, of course, do let us know. Just for the dies, the next planned event from us is the investor update call on the 10th of December. So we look forward to speaking to you then, if not before. So wish you a good weekend and go safely, please. Thank you very much.