The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™

Anglo American CEO: ‘governments looking to largest firms’

In a Q&A with Critical Resource, Cynthia Carroll sets out her thoughts on recent commodity price falls, managing resource nationalism and why Anglo American’s work on community development helps its growth prospects

Critical Resource: Are we witnessing the beginning of the end of the commodity super cycle? And what does current economic uncertainty mean for Anglo American’s investment plans – and overall relations with host governments?

Cynthia Carroll: The current economic uncertainties are certainly impacting demand for some of our products.  However, our medium- to long-term view for the mining sector remains positive.  Continuing industrialisation in emerging markets will ensure resilient demand for our commodities into the foreseeable future.  This applies for investment commodities (such as iron ore), more consumption orientated metals (such as copper) as well as in luxury goods (for example diamonds).

Growing demand, and the inevitable depletion of existing mines over time means that Anglo American will continue to invest for the long term, although current market factors are of course taken into account.

Given the funding challenges that smaller mining companies face, we are certainly seeing host governments looking more towards the largest players, such as Anglo American, to invest in their countries.

CR: Drawing on Anglo American’s recent experiences (for example in South Africa), are there any key lessons you would draw for other resource companies in how to manage relations with host countries, including the threat of resource nationalism?

CC: The critical thing is to understand what governments, and voters, want.  Usually these are perfectly sensible – jobs, business opportunities, improved infrastructure, better public services and so on.

I believe that mining, while not having all the answers, can play a very constructive role in addressing many of these challenges. For example, our enterprise development programmes are now supporting over 47,000 jobs worldwide – the equivalent of about half of our own workforce. In South Africa alone we will have created 25,000 new jobs by 2015 by supporting the establishment of small enterprises, independent of mining. Our global procurement budget is $14 billion, representing a huge development opportunity.

About three quarters of that procurement is sourced from host countries, and we have a group-wide policy to source more from host communities where we can.

If we can get these sorts of initiatives right so that we as mining companies optimise the development potential of our investments – and critically if we communicate this effectively so that this reality is widely understood – then I believe that governments will want to encourage investment by responsible miners.  I’m certainly seeing that sentiment as I travel around.

CR: Recently you said that delivering value in host communities was key to Anglo American’s success. Also Anglo American is well known for its innovative approach in terms of social performance management. At the same time, at some major Anglo American projects – in Alaska and Peru, for example – there has been opposition on the part of certain local or regional groups, holding up development. Can you do more in these cases, or is winning sufficient stakeholder support sometimes impossible to achieve?

CC: We are doing a lot, as you say, but yes we can do more, and I want Anglo American to do more.  In particular, we are focusing on growing our enterprise development programmes – I really believe the sky is the limit for them – as well as rolling out our local procurement policy.

However, it is important to base responses on the facts, not just on headlines.  In Peru we have strong local support as well as backing from government for our Quellaveco project, but we have taken time to understand and address stakeholder concerns through the establishment of a dialogue table involving the community, government and NGOs. We are the only company doing this in Peru. We think that patient approach is best when we are making such long-term investments.

In Alaska, there is certainly opposition to the Pebble project, which is still in the exploration phase.  However, opinion in communities nearest to the potential mine site is actually quite balanced.  As we have yet to present our final mine plan I can understand that there are concerns, but I also firmly believe it is too soon to be making firm judgements.

Once we can explain our plans, show how we can manage any risks and describe the benefits then I’m confident we will secure local backing.

CR: Looking across the industry, stakeholder expectations and demands on extractive firms have generally intensified over the last decade – is responding to and managing these expectations simply about risk management, or do you see it as a real source of competitive advantage?

CC: It is certainly good risk management.  If communities don’t think we are a good neighbour life can get very difficult.  But it is much more than that.  When I meet governments I am increasingly told that they want the best developmental return from their mineral endowments.  They are looking for sophisticated, holistic approaches to socio-economic development, and they want companies that have shown a sustained commitment over the decades to supporting host communities.

That does put Anglo American in a strong position as we seek the best growth opportunities – not only do we have financial firepower and, in my opinion, unrivalled technical skills, but we also have a long tradition of innovation in community development as a company that has been operating primarily in the developing world for nearly a century.

CR: In general, are there any further measures which it may be helpful for Anglo American or the industry as a whole to take, to strengthen industry-wide sustainability standards (and to reduce the risk of being undercut by companies with weaker principles in this area)?

CC: I actually think that the leading companies in the industry operate very responsibly these days.  That might not always have been the case, but I do believe that most of the necessary standards exist already.  However, what is lacking is broad recognition of that progress – our industry in general still has a bad reputation that isn’t warranted.  To combat this, I think it is very important for us to communicate more effectively, to be clear about our standards, to open ourselves up more for external scrutiny, and respond positively to constructive and valid criticism.

At Anglo American we have started to advertise to tell our story to a broader audience, and that is already having an effect on our perceptions and, interestingly, on the number and quality of people wanting to work for us. We also need to be clear about our standards – unlike most companies, we publish our standards, and even some of our detailed guidance, such as our award-winning Socio-Economic Assessment Toolbox, or SEAT, which is the foundation of our community relations work.

But we do need to do more.  For example, I believe we should respond to growing customer interest in third party accreditation, much like the forestry sector has achieved with Forestry Stewardship Council.  I’m interested in the possibilities that such schemes offer, both because of the credibility we could gain, but also the potential commercial benefits.  We’re actively involved in those debates, and I see a lot of promise.