GMS: Mark Cutifani talks up Anglo American’s future-facing metals strategy

Anglo American (LSE: AAL; US-OTC: NGLOY) is charting a future-facing path forward by strategically positioning its diversified portfolio of mines to service the emerging energy revolution, CEO Mark Cutifani told The Northern Miner’s recent Global Mining Symposium.

“We see ourselves as a material solutions company, meaning we look at the world to see what it requires and try to make sure we’re delivering raw materials supporting that global change,” said Cutifani.

“Our portfolio is increasingly tilted towards future enabling products, being those that we need to decarbonize energy and transport and meet consumers’ needs – from home appliances, electronics and infrastructure to food and luxury goods. We see a material opportunity for Anglo American to continue to set itself apart in terms of the performance of our diversified business, further enhanced through sector-leading 25% volume growth over the next four years, led by copper and the platinum group metals (PGMs),” Cutifani said.

As the supplier of such critical materials, Cutifani considers it the industry’s duty to ensure that in everything it does, it acts responsibly and delivers enduring value for all stakeholders, including the planet. “By integrating technology with a sustainability mindset and our clear ESG commitments – including carbon-neutral operations by 2040 – we are fundamentally changing the nature of mining to position ourselves for a sustainable future,” Cutifani said.

In Cutifani’s view, it’s not simply about trying to pick a winner in a commodity. It’s more about ensuring the quality of assets, ensuring the cost structures are right and then doing well with good assets as part of sound business administration.

“But at the same time, we’re keeping an eye on how the world is moving. So, the energy transition, climate change, the circular economy, significant technological changes – all these things feed into how we think about setting up the portfolio. So today, 85% of the commodities in which we operate, we call future-facing commodities.

“They either support these megatrends that we see on a global scale, or they’re playing into the consumer space like diamonds, or with met coal – it’s an important commodity in terms of the transition from current steel technologies to green technology, which is hydrogen based,” said Cutifani.

Anglo American has been actively shaping the portfolio over the past decade. “I think, unlike some diversified miners who are more concentrated in one or two or three commodities, we’ve got a much broader suite of commodities, which allows us to allocate our capital, I think, a little more wisely and effectively,” he said.

“In fact, if you look at our returns over the last nine years, we’ve outperformed our major competitors. So, I think the proof has been in the pudding, and we think we are well-positioned for growth for the next ten years,” said the executive.

Most critical of the future-facing metals in its portfolio are the PGMs which the company mainly produces in South Africa.

“We see a transition from traditional fossil fuels and the older fuel types to the new technologies as both an opportunity to improve our environmental credentials and reduce our operating costs to be more competitive. So already today, we have a process where we have all of our South American assets using renewable energy to augment the diesel-fueled power generation in the operations.

“We’re also looking at using solar, wind power hydropower to make hydrogen and use it as an alternative to battery power,” said Cutifani.

The company is currently trialing hydrogen-powered trains at mines in South Africa, placing it on track to change the energy mix inside the mine perimeter substantially.

“So ultimately, we think we can achieve carbon neutrality on at least eight of our operating assets by 2030. And we’ll have the whole business carbon neutral by 2040,” he said. 

Cutifani added that Anglo American is also working closely with governments to change the grid system so they can provide renewable energy across the field. For example, in South Africa, the company put to the government a strategy for installing wind farms in the platinum-rich Northwest province, where there is high wind activity, and for implementing solar arrays in the north, where there is abundant sunlight.

“And inside our mines, we have old mines filled with water. We can use solar power to fuel our operations or drive our operations. During the day, when we’ve got more capacity, we can pump the water out of the underground mines into a dam and then let it run back at night. And so, we’ve created a battery out of an old flooded underground mine,” Cutifani explained.

The mining executive said hydrogen had certain advantages over electric vehicles, despite fundamentally sharing the same electrified chassis.

“It’s a bit like a natural gas cylinder in your car. Hydrogen could be used the same way. We’re seeing trains, commercial vehicles and trucks using hydrogen, which can run non-stop for about 24 hours per fuelling cycle.

“We can accomplish this because the range you get with hydrogen is quite extended compared with a battery, and you don’t have the weight of a battery. So, it’s more efficient energy use,” he said.

However, Anglo American is also positioned to manufacture hydrogen to fuel the next chapter in the energy revolution.

“The way to harness hydrogen today is to use renewable energy as input to make hydrogen with a reduced carbon footprint. That use of hydrogen requires platinum and palladium, and specifically iridium, to convert the hydrogen via electrolysis from water. And that gives us a virtuous circle.

“That will provide us with a demand increase of probably 10% to 20% by 2030. But the bigger game is when we see large-scale investment in primary hydrogen production, from 2035 onwards,” said Cutifani. “We’re playing the long game in PGMs.” 

PGMs also played an important role in the company’s recent operating results before Covid-19 roiled operations.

Cutifani conceded the company has had “quite a few operating challenges in 2020, and then we had Covid. So, the recovery last year was significant with record production out of our refinery, which dovetailed into “very good metals prices.”

Diamonds also form a significant part of the company’s portfolio, which Cutifani said was another recovery story. The company has reported an increase of about 30% in the price of rough diamonds sold over the past 14 months.

Elsewhere, copper and iron ore were significant contributors to the company’s ongoing success.

“We’ve had a generally solid operating performance. It was perhaps not as good as we could be; I’m looking at Covid and those sorts of things, which resulted in probably a 5% impact on our production.

“I’d expect, based on consensus numbers, we will show our best operating results for the business in 2022. Our balanced investments are driving margin-enhancing volume growth of 35% over the next decade, including copper from Quellaveco, due to start-up mid-year,” said Cutifani.

“Through our integrated technology and sustainability program, we are well-positioned to run the business safely and sustainably, further enhance our competitive position and – disciplined with our capital – deliver value-adding growth as a foundation for future returns.”