Anglo American CEO Sets Out Way Mining Industry Should Operate

A recent speech by Mark Cutifani, the CEO of Anglo American plc which owns 85 percent of De Beers, on the recent history of the global mining industry provided an excellent summary of what has been happening and what miners need to do going forward. Speaking to the Prospectors And Developers Association Of Canada, he naturally focused on what has been happening at Anglo American over the past year or so, but his comments on mining apply in large part to the diamond business – and indeed to other sectors. I will be quoting Cutifani quite extensively simply because his comments were so on the button.

"I don’t think anyone in this room or the industry could disagree with me when I say that the last 12-18 months have been a rollercoaster for the industry and commodity markets," he said. "The key questions for all of us is, have we learned our lessons … and where to from here? In starting the conversation, we have to understand where we fit in society and how we support life as we know it and the imperative we all have to make things better for the generations that follow."

Speaking on the contribution mining makes to society, he pointed out that although the mining industry contributes to 45 percent of the world’s economic activity directly or indirectly, it disturbs less than 0.5 percent of the earth’s surface. "However, where we have the most impact – in our local communities – we have to manage the perception that in many cases we are not worth the disruption or inconvenience given the rest of the world is the major beneficiary of our activities. While locals usually appreciate the jobs – in many cases other community members are lumbered with increasing costs of services and other consequences that do not help them live a better life."

Miners have to do better in making sure they contribute to local communities and help them "secure a better and more equitable slice of benefits that generally go to regional of federal governments" as well as thinking about "how to identify and manage the unintended local impacts of globalization that burden our local communities and their ecosystems".

The mining industry needs to reconsider its role in "sustainably improving society in a way that brings the greater majority along the journey together". Major mining firms such as Anglo American must recognize their global and local role communities. And since resources are not infinite, partnerships will help in the campaign to promote human rights and community upliftment, infrastructure development and R&D.

The industry needs to work with governments, NGOs and other groups on topics such as the delivery of sustainability goals "to create a more inclusive form of globalization" via a renewed social contract. Anglo American is setting targets to renew its commitment to education, biodiversity, energy efficiency and job creation, "including setting stretch goals to support us to be more resilient for the future".

Then there is the need to adapt. "Productivity remains the number one operational challenge for the industry – it has dropped by 30% over the last decade. A history of short-term solutions for quick gains has impacted assets across the industry, escalating costs as problems accumulate. As grades continue to decline, mines get deeper and resources become more constrained, it is ever more important to get the basics right."

The firm he leads has created "a platform of operational excellence" to deliver "something closer to the full potential of our asset base". In a changing world, the ability to change and innovate is critical for all companies. "Our FutureSmart mining program adopts the principles and approaches of open innovation, collaborating with a broad range of partners to build resilience through innovation in safety, productivity, energy and water, as examples."

Moving on to the issue of the macro-economic environment, the company has accelerated the execution of its strategy set out in 2013, "rather than pulling down the shutters". This includes a just-in-time approach to streamlining operations, reducing net debt significantly and creating a business that is "truly robust irrespective of swings in the cycle".

The mining giant is also thinking ahead about longer-term shifts in population demographics that "will change consumption patterns, and as greater proportions of the world enter the burgeoning middle classes, this will increase consumer-led demand".

It's an excellent speech and well worth reading in its entirety.