Anglo American facing the future

ANGLO American chief executive Cynthia Carroll echoed a sentiment expressed earlier at Indaba Mining 2010 in Cape Town Tuesday when she told a packed auditorium that there was a question mark over the sustainability of the current recovery trend, “particularly in the advanced economies”. Ron Berryman reports from South Africa.
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Anglo American CEO Cynthia Carroll

Ron Berryman

“To some extent we’re operating in a world moving at two different speeds with advanced countries going at relatively slow speeds whereas the major emerging economies should continue to grow robustly,” she said.

However, talk of decoupling no longer made sense because economies and markets had become more closely integrated and no one was immune to the global economic cycle.

“Over the next year the advancing economies will be wrestling with high unemployment while the emerging economies have to deal with the prospects of rising inflation,” Carroll said.

“In the last few days financial markets have got a little more jittery as political and economic risks have been identified.

“Worries about China over-heating, the emerging crisis in Greece and what that means for other governments has triggered sell-offs. And while recovery is unlikely to be entirely smooth, I think we should take comfort from the strength of the underlying fundamentals in our key markets such as China, India and Brazil.”

Carroll told the conference that she believed the great challenges facing the mining and metals industry were energy, water, sustainability and climate change.

After more than three years in Anglo American’s top job, she admitted it had not all been plain sailing. She described how she had been disturbed by the number of fatalities in African mines and had made safety one of her first priorities.

“Our safety record was simply unacceptable and while changes initiated in 2007 showed some progress – we had 27 fatalities in the first half of 2007 down to 17 in the second half – we were simply not making breakthroughs.

“It became clear to us that we were not going to be able to do this alone to really change the underlying culture of the organisation and achieve substantially different results until we collaborated with all those with a vested interest in protecting lives.

“We established a tripartite safety initiative in conjunction with the government and the unions.”

Carroll said the safety record had improved considerably, down to 19 in 2009 from 44 in 2006.

“It shows we can get fatalities down to zero.”

One of the six biggest mining companies in the world, Anglo American has a significant investment in Africa covering diamonds, platinum, thermal and metallurgical coal.

Carroll said the company had “some exceptional brownfields expansions and a world-class pipeline of approved growth projects totalling around $US17 billion with a further $44 billion of unapproved projects”

“Our Sishen South development is one of the four main projects that we have globally and with $900 million investment on top of the just completed $1.2 billion expansion, this is a significant project for the group.”

Carroll said Sishen would become one of the five top iron ore mines in the world.

Talking on energy, she pointed out that because demand was expected to increase by more than 50% in the next 25 years, it was crucial that reliable, abundant, cost-competitive and secure energy supplies were maintained for the long term.

“Here in South Africa, how we tackle the energy challenges will be crucial to the region’s ongoing prosperity,” she said. “It’s a situation that calls for all parties to act in concert to achieve cost-effective solutions.

“There are no quick fixes.

“Clearly none of us is in a position to sustain large electricity price increases year-on-year. But we do need energy, so all of us – industry, government and Eskom – need to work together.”

The national power utility, Eskom, has proposed power price rises of 35% a year for the next three years.

Carroll suggested that energy alternatives, supplementary supplies from industry and new technologies should be pursued.

On climate change, she said the mining industry had an obligation to keep the impact of what it was doing to a minimum.

“In the mining industry, the reality is that we have to take action if we are to stay in business,” Carroll said.

“Our industry is responsible for 8 per cent of global CO2 emissions or 25 per cent if we include coal. We will simply not be able to continue carrying on the same way.”

Carroll believed there was an immediate opportunity for the industry post-Copenhagen.

“We have to be proactive and we have to demonstrate to the world that the mining and metals industry acts responsibly,” she said.

“One of the challenges we face is the future direction of legislation.

“Different policies in different operating areas only makes the situation for all of us so much more complex.”