Carroll talks mining prospects, Anglo projects and the Plat Review.
GEOFF CANDY: Hello and welcome to this Mineweb.com Newsmaker podcast. Joining me here live at the Cape Town Convention Centre is Cynthia Carroll, the outgoing CEO at Anglo American. Cynthia, you took over the reins at Anglo American in March 2007. It’s been an exceptionally eventful five years, not just for Anglo American but for the sector as a whole. What do you think is the most significant change you’ve seen in the mining sector in those five years?
CYNTHIA CARROLL: Well, first of all we have clearly gone through two significant economic downturns that I don’t think anybody anticipated, and at the same time Anglo American had two record years – 2008 and 2011. I think that there has been a developing disconnect between the expectation of investors and what the mining companies have been able to deliver in the short term. And during the peak of the cycle when everything was going gangbusters, everybody was saying you have to invest and you have to spend and we want to see growth and we want to see production.
But we’re in a period right now, again that nobody would have predicted when there has been much more contraction, starting with Europe in terms of demand and then a slowing down in Asia. So some investors are walking away completely from the industry, others are putting greater demands on industry heads to say, we want to be assured of our returns first and foremost before you spend any money, and we want you to cut back significantly.
GEOFF CANDY: What do you see as the implications thereof, because there does seem to be a rise in slightly more conservative investment strictures on these companies – what does this mean for production for the commodity sector in general?
CYNTHIA CARROLL: I think first of all, the fundamentals of the industry for the medium to long-term are very, very strong. I think that the demand, starting with China, will continue. I was just in China and India a couple of weeks ago and in the case of India they last year produced about 70 million tons of steel. Over the next 10 years the expectation is that it will grow to between 150 and 200 million tons. Similarly, on the Chinese side there’s been about 50% urbanisation and I think most people believe that that will rise to at least 60% over the next 10 years, and that will support a steel demand and production level of between 900 and one billion tons. So I think, again, that the fundamentals are very strong, or very good.
On the other hand, I think what many do not understand is the increase in capital intensity in projects, whether it’s labour costs or whether it’s the time delays through accessing the right permits or licences which we experience in Brazil as an example, greater expectations from governments around the world. I think that creates more challenges for the diversified and that means that we’ve got to be that much more disciplined about our deployment of capital and very selective and prioritised going forward.
GEOFF CANDY: If I look at Anglo American’s make up at the moment, you’re focusing on platinum and diamonds unlike a lot of the other majors – one does get the sense that we’re beginning to see an inflection point within the diversified sector, a significant number of CEO changes. We’re seeing BHP Billiton, for example, looking at energy and potash. Is there a sense that we’re looking at now getting ready for the next 10 years and if so, how do you see Anglo American placed?
CYNTHIA CARROLL: I think that we have one of the most attractive project pipelines in the industry and I think we’ve got a very enviable set of assets that we want to continue to produce out of and grow going forward. We have a very clear strategy with very defined commodities and we are not deviating from that. We think they’re the right commodities to grow, they serve those markets that are led by China and we’ve got great opportunities, but we do need to, as I said, prioritise.
For the rest of this interview, please go to the Moneyweb.co.za website: http://www.moneyweb.co.za/moneyweb-safm-market-update/live-from-mining-indaba-2013-cynthia-carroll-outgo