TORONTO (miningweekly.com) – The ability to innovate and build adaptation into the DNA of mining companies is a critical requirement to successfully navigate major market changes, Anglo American CEO Mark Cutifani said during a keynote address at the 2017 Prospectors and Developers Association of Canada’s yearly convention.

According to Cutifani, $25-billion worth of projects are held back at the starting gate because companies cannot establish the critical relationships needed at local level.

Because mining contributes so much to the economy on just about every level, it is an imperative to adapt. The resilience to survive such market changes is what delivers returns.

SAY IT CLEAR
According to Cutifani, the resources industry seems unable to articulate its story despite being quite good at talking about themselves and between themselves.

“If someone opines we can do without mining, the issue is ours. We are not articulating our story good enough.”

He said despite 45% of global economic activity being attributable to mining in some way, very few people understand the concept, notwithstanding the fact that mining activities use less than half a per cent of the earth’s surface to extract minerals.

Many miners thought the good times leading up to 2008 would not fade as quickly as they did and, as it stands, with underlying demand now expected to grow by 3.5% a year, this is going to support the survivors if they get the fundamentals right, he says.

Governments and their requirements for local communities are key partners in mine development. When approached correctly, local governments are becoming a driving force on whether a project makes it or not.

“We need to be true to the commitments we make,” he notes.

MANAGEMENT PRACTICES
The mining industry's focus has shifted to better management practices.

Cutifani says survival meant a massive transformation of the asset base, in a rapid time frame. Anglo American has adopted an industrial approach, having downscaled the portfolio to 41 today, from 61, which came at the cost of significant layoffs across the portfolio.

These actions have resulted in a 41% rise in productivity and a 31% reduction in cost, while growing the production base by 8% and reducing debt by 38%. “It’s an absolute imperative to adapt and change to be successful,” Cutifani emphasises.

He says Anglo American, which is celebrating a century of mining this year, remains open to a diversified model, based on a focus on exploration, an improved operating model, a unique way of doing projects, a sharper balance sheet and sharing cost and structures to attract talent.

The company has started a smart innovation platform in the quest to add another 40% to productivity that it needs to keep ahead of resource depletion.

Cutifani highlighted the resilience of Anglo's portfolio and shareholder returns as keys to success.

He pointed to Adam Smith’s well-known quote: “It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest”, noting that this maxim now included the industry better listening to and understanding the broader stakeholders involved.

“Innovation is the way people can be brought along this growth path."

NEXT FOOT FORWARD
The company has chosen diamonds and platinum as its core focus, lamenting that it has been 20 years since a major diamond discovery has been made. The company will, in future, rely on its tremendous platinum resource, which it would be able to mine for 200 years.

Cutifani said he liked copper and zinc, but noted projects are becoming more complex; however, that is where the potential is.

“Diamonds, copper and platinum are where we have the biggest advantage in terms of quality of assets. Bulks have seen a lot of capacity buildout, but we do not think that is sustainable. There are no bad commodities, only bad projects,” he states.