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The Value of Resilience: mining’s opportunities in a time of global disruption

Today is a special day as we celebrate the Mining Indaba’s 30th anniversary. Pioneered in South Africa’s momentous year of 1994, the Indaba has become one of the world’s premier mining investment forums.

Keynote address by Duncan Wanblad  Chief Executive of Anglo American

So, I would like to start by acknowledging Hyve, the custodians of the Indaba, and of course, everyone who has been instrumental in making this forum for African mining such a success. The theme for this year’s Indaba, centred around the phenomenon of disruption, is particularly apt.

The last few years have certainly been characterised by volatility and disruption – from macro-economic risks and geopolitical upheavals to inflation and higher interest rates, coupled with China’s tentative economic recovery, not to mention fragmented supply chains and the dual crises of energy and climate.

That is our reality and, with that backdrop, countries and companies must adapt, be agile and be more resilient.

Today, I will share a few thoughts on how we can be set up for that future, and to have greater resilience.

First, we have to reckon with increased disruption as a new normal. It feels unlikely that we are going to have less disruption and volatility, and we could well see more of it. Maybe it was always thus, but it feels truer than ever that the only constant is change.

It is, of course, our job as leaders to navigate our way through change and uncertainty, but we must be active in how we deal with it.

Secondly, we need to not only get through the current stresses and strains on business and society but also adopt a truly long-term mindset. Too often, we can be seized with what is happening in front of us, and forget to look further out, to see what our prospects might be as an industry.

We have to change that. We must build a more resilient mining industry: resilient in terms of how we operate our businesses through the cycle; resilient in terms of the returns we can make to the shareholders who own our companies (and that includes millions of public sector pensioners, employees and community trusts, let’s be clear); and resilient in terms of the breadth of contributions we make to communities and host countries – nowhere more relevantly than across African mining countries.

And thirdly, and perhaps more importantly for this year’s Indaba. I want to give voice to the power of partnerships for the success of Africa’s mining industry and the countries that host us.

Whether it is playing a leading role in helping South Africa address its big three challenges – energy, logistics, crime, and corruption, or building on our longstanding relationships with the governments of Botswana and Namibia, we recognise the importance of these efforts.

With prospects for investment and growth in Angola and Zambia, we understand that only through effective partnerships with host nations can we offer real and sustainable economic and social benefits for Africa and her people.

Theme 1 | Disruption is the new normal

Firstly, then, considering our new normal of disruption, it would be wrong for me to stand here and pretend that we have all the answers and that we are as resilient as we need to be.

Far from it. We have been making several necessary changes at Anglo American in the last few months, including to reset our own business onto a more sustainable and therefore resilient footing given how much has shifted around us in the last couple of years.

Like everyone, we have to set up our mining operations for long-term success and to be competitive on the world stage. And that starts with reliably delivering what you plan to deliver – the right volumes at the right cost to generate the right value. That’s the foundation of resilience.

To mix up a piece of golfing wisdom, volumes alone are for vanity, while it is the putting that brings the value.

Finding the sweet spot in that combination of volumes and value is the only way to attract the capital to sustain the mines that are the lifeblood of so many economies.



Finding the sweet spot in that combination of volumes and value is the only way to attract the capital to sustain the mines that are the lifeblood of so many economies.

It is clear to me that only the companies and countries that pay attention to global shifts, demonstrate agility in the face of uncertainty and reposition themselves for the future, will prosper.

And despite these shifting sands, there has never been such an opportune time to build our resilience, not only as the mining industry but as host nations too.

What do I mean by resilience? Well, firstly, it is more than just a mindset, but also a determination to get things done, and with urgency.

To become resilient, you must be able to manage your position and not have to rely on others to help you survive and prosper. We have to be leaner; we have to be hungry, and we have to keep evolving.

Theme 2 | Looking beyond the cycle to build resilience

Now of course a lot has changed in the last 18 months and different circumstances require different approaches. We are alive to the challenges we face near-term. We have to think and act through the cycles.

In many ways, we too as a company have faced a perfect storm amid the global volatility. It is very unusual that we see the confluence of a number of effects like PGMs and diamonds being at the bottom of their cycles, coupled with the logistics issues hampering Kumba, all happening at the same time in a portfolio like ours.

As I said, an unusual set of circumstances, but we must be resilient, nonetheless. In response, we have taken a series of actions to get back on track – resetting our plans to ensure we meet them, reliably and repeatedly.

There may be some short-term pain in doing that, but it’s the right thing to do for long-term value creation.

Cycles will also be cycles – they will come and go. However, the combination of applying the right capabilities and decisions to the high quality and mix of assets will prevail and deliver a competitive advantage over the long run.

The last few years serve as a prime example of mining’s ups and downs. Amidst the global economic turmoil caused by the pandemic, mining emerged relatively unscathed, thanks to the leadership shown by the industry to ensure that mining’s role as the engine of many economies was able to continue – and to do so safely.

This resilience led to a significant boon for a mineral-rich country like South Africa. I want to pick some of the numbers to remind us that this industry – our industry – is one that genuinely shares its positive benefits with the rest of our society.

In 2021, the R70-billion the mining industry in South Africa paid to the fiscus in company taxes and royalties was 70% higher than in 2020. In 2022, that figure rose to R88-billion (company taxes of R73.6-billion, and royalties of R14.2-billion).

What’s more, the South African government’s extension of its social grants programme, including the Social Relief of Distress Grant during the Covid-19 pandemic, was largely made possible by the mining sector’s fiscal contributions.

As the cycle moves and commodity prices fall back, those contributions will decrease markedly, so it is in everyone’s interests for mining to be more resilient to help moderate the volatility in fiscal contributions.

The landscape has now shifted markedly. In 2023, we saw a rapid decline in certain commodity prices as interest rates soared to dampen rampant inflation and economic growth faltered – PGMs, nickel, lithium, and cobalt to name a few have all decreased sharply.

Concurrently, mining companies have been facing their own set of challenges, fueled by declining ore grades and sharply increased input costs. Margins evaporate quickly in these circumstances, so something has got to give. We are all aware of the pain in South Africa’s PGMs industry right now.

What matters is the industry’s and government’s ability to navigate these challenges to ensure that the industry does survive and prosper – yes with smaller direct workforces, and this is a reality that the industry is contending with right now.

This is the immediate crisis that the mining industry faces, especially here in South Africa. How do we help protect the dignity of those who will be adversely affected by the necessary reconfigurations of many South African mines?

The ramifications go further than just those who are employed directly by the mining industry, of course.

There are many businesses – large, medium, and small – that are entwined in the mining supply chain, and in turn, employ people and contribute to economic activity.

They too are affected by the difficult period of workforce contraction that mining is facing to be sustainable for the long term. There are no simple solutions to this intricate web of economic and social dependencies. But the need for a comprehensive, compassionate response has never been more critical.

It is a call to action, not just for those within the mining industry, but for all of us, as we confront the reverberations that ripple through the economy. Through numerous programmes and interventions, the mining industry has long committed itself to thinking beyond the cycle.

One good example is the formation of the Impact Catalyst – an innovative partnership model for fostering economic activity beyond mining led by Anglo American and Exxaro, along with the CSIR, Mine Water Coordinating Body and World Vision and the Industrial Development Corporation.

This approach provides comprehensive and scalable benefits for stakeholders across mining communities. Following the successful launch and several pilot projects in Limpopo – spanning broad sectors from agriculture and tourism to technology – work began in the Northern Cape to expand community access to broadband and other communication technologies.

This includes projects focused on economic development, education, health, municipal infrastructure, and early childhood development. Of course, this does not fill every need, but it does demonstrate the industry’s efforts to fuel economic growth, beyond mining.

And as I have said before at this stage, there are also entirely new economic sectors that countries must embrace – the opportunities of the energy transition for South Africa, as a prime example, are both widespread and large scale.

Our southern Africa Renewable Energy Ecosystem, through our joint venture with EDF Renewables and resulting in the formation of Envusa Energy, is gathering significant momentum now.

Initially, Envusa will launch a network of 520MW of clean energy through on-site and off-site solar and wind-farm projects, located on the border of the Eastern and Northern Cape provinces.

This is the first tranche of our targeted 3-5GW over the next decade, spurring considerable economic opportunity and of course, helping bring greater energy availability and grid resilience as part of South Africa’s green energy future.

There can be no doubt that, together, society and business are in a prime position to help configure new mechanisms for employment and economic activity. We know that we can achieve so much when we work together towards a common goal.

Theme 3 | Partnerships for progress

This brings me to my third point, which is the power of partnerships in driving progress. South Africa, Botswana, Angola and Zambia are just four of many other African countries where I believe our industry is demonstrating the power of partnerships.

When I look at South Africa, I’ve described the challenges the mining industry faces as a “burning platform” in many conversations with government and other stakeholders.

The binding constraints in the country’s domestic environment – energy, logistics, crime, and corruption became an impetus for us to act.

The Business for South Africa initiative, which is a true partnership between business and government and has the full support of President Ramaphosa, must be commended for spurring aligned action to address these constraints to then enable investment and growth.

I’m pleased that we are seeing some encouraging progress, with determined commitment from all parties. But is this enough? The answer is no. The pace of progress needs to accelerate, of course. But the crucial thing is that we have begun the doing, we are well underway, and we have left the talking at the door.

What started as a conversation amongst a few, has become a movement of more than 130 companies who are putting their shoulder to the wheel in support of government.

I believe that if we double (or perhaps triple) our efforts, we will get to a place where every South African can see and feel the difference that this partnership between government and business is making.

We owe it to millions of South Africans to help get this economy, which has so much potential across many economic sectors, back on track, attracting investment and pointing firmly forward. We cannot afford to fail.

As we look beyond South Africa at other examples of partnership, remembering different economic priorities in different countries, there is our 50+ year partnership with the Government of Botswana that is a truly unique example of business and government working together to transform an economy.

As we extend that partnership under a new agreement, De Beers and the government have created a Diamonds for Development Fund designed to help accelerate Botswana’s economic diversification in support of the Government’s Vision 2036, National Development Plan.

After an initial investment, the fund will receive income based on the profitability of the Debswana joint venture, aligning interests across the board.

I cannot tell you how delighted we are to have reached this milestone for the next generation. And I would like to acknowledge the leadership of President Masisi, and of course his team, in taking such a long-term view.

We are also pleased with the progress we are making in Zambia, where President Hichilema’s government continues with its efforts to create an investor-friendly environment, with much focus on the country’s abundant mineral resources.

o Zambia’s mining sector appears to be on track for renewed activity – and that is good for Zambia, and African mining.

In our case, I am pleased that we are progressing with early-stage exploration in Zambia’s North-Western Province to identify potential copper and cobalt opportunities.

Despite being early stage, we believe in delivering a positive impact without delay. This is the right thing to do. To that end, we are investing in a wide-ranging programme of community development projects in Zambia – in education, healthcare, access to water and small business development.

We must never forget that mining companies are usually guests, so it is our duty to demonstrate our commitment, build partnerships and help create mutual trust for the long term.

Angola has also put itself back on the mining radar by making significant progress toward creating a stable and more predictable investment environment.

We have signed Mineral Investment Contracts with the Government of Angola for licence areas in the north-east of the country, with each concession area being a partnership between De Beers and Endiama, Angola’s state-owned diamond company.

The signing of these contracts represents an important milestone in our new partnership with Angola, which is based on a mutual desire to build a thriving diamond sector that delivers meaningful socio-economic benefits.

Beyond diamonds – and with attractive reserves of copper and nickel – Angola is highly prospective and is one of four countries in sub-Saharan Africa where we have an active greenfield exploration programme.

We certainly look forward to being part of this next stage in the development of Angola’s mining sector.

A key feature that underpins these partnerships is a commitment to building shared prosperity and unlocking potential for African mining.

But for this potential to be realised as an engine for economic development and improved living standards, countries must implement the regulatory frameworks and conditions to be as competitive as possible.

We sometimes forget this simple truth: mining jurisdictions across the world are competing for every dollar of investment. Capital is highly mobile and, increasingly as we are all seeing, the best capital will go to those countries that are set on making themselves competitive for the long term.

We have been an investor in African mining for more than a century – we can call that “the long term”, and we will continue to invest with that mindset. But more needs to be done to make this great continent’s prospects compelling for even more investment.

I spoke last year on this stage about the vast opportunity presented to African mining jurisdictions by the expected demand for metals and minerals over the coming decades, and the uses of those raw materials in enabling the global energy transition.

This is an opportunity not to be missed for African mining. We must get this right, together.

Closing

As I stand here today, I am honoured to lead a company that has not only stood the test of time but has thrived and evolved over the decades.

Our journey has been marked by resilience, innovation, and an unwavering commitment to making a significant and lasting contribution to the communities where we operate, nowhere more so than right here.

My belief in our potential and prospects is stronger than ever. This belief extends beyond our own company to encompass the collective might and promise of the mining industry. If our industry can build the necessary resilience, rarely has mining’s outlook been better.

This is the time to build that resilience, build Africa’s competitive advantage, and build our partnerships for the long term.

Let’s not simply navigate the future; we must shape it.

AFRICA UNDERMINED NO MORE