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Anglo CEO Cutifani: Mining industry facing unprecedented disruption

Feb 04 2019 13:38
Carin Smith

The mining industry is facing a time of unprecedented disruption, says Mark Cutifani, CEO of Anglo American.

Speaking on the first day of the Mining Indaba 2019 in Cape Town on Monday, Cutifani said the relationship between governments and mining companies was increasingly important.

This played out against a backdrop of declining mineral resources that required deeper mining and escalated the physical challenges involved, he said.

Approximately 16 times more material must now be mined to obtain a pound (0.45kg) of copper than 100 years ago, he noted.

'Slim' divisions

"In SA the economic equations around mining [are] pretty slim," Cutifani said. "Shareholders get about $7 out of every R100 in revenue; the government receives about $24; employees, about $35; and suppliers about $34 in every $100 revenue."

This means cost-cutting is required, he said. "For a shareholder in a mine, we have to improve our costs year-on-year [by] at least 5% to 10%, because the material we are mining is becoming harder due to extraction challenges and other factors.

"That changes how we operate in the world today."

He said all these issues had an impact on local communities in mining areas.

"Five years ago, we were losing our competitive position and made mistakes regarding capital allocation, but now our production has doubled compared to [then] and our operating cost has dropped 45%.

"That means we can now deliver competitive returns," said Cutifani.

Innovation will remain a focus for Anglo American over the next five years. At the same time, becoming a catalyst for local communities will be important for the mining company, he said.

Employment will lag behind

"The reality is that we will grow, but the employment rate will not grow at same pace. So, we look at how we can be a catalyst for creating five indirect jobs for each one job we create in our operations," he explained.

"By being a catalyst, it means we will help local communities to identify new opportunities by using our infrastructure. For instance, our roads could help turn subsistence farmers to commercial farmers. Access to water would also offer communities opportunities."

Communities must thrive after mining

Cutifani said mining companies would not be able to develop resources if they did not help transform the surrounding communities at the same time. This would help mines be regarded as positive additions to an area, he said.

During a panel discussion, Anik Michaud, group director of corporate relations at Anglo American, said the aim was to allow mining communities to thrive long after a mine was gone.

"By no means do we have all the answers, but we are working with all stakeholders to try to find an effective strategy. We need to put people first and care about the long-term vision," she said.

"We also need to look at the future of learning. We need to understand the skills that will be needed and our message to government is that we need to work together to establish policy and regulatory frameworks to allow the mining industry to embrace the changes of the fourth industrial revolution."

In her view, it is also important to work with academia to ensure the right skills are created for the mining industry.

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