Anglo chief warns on pace of innovation – by James Wilson (Financial Times – January 26, 2014)

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One of the world’s senior mining leaders has called on the sector to speed up innovation or risk being marginalised by groups that spend more on research.

Mark Cutifani, Anglo American chief executive, said research and development in mining was lagging behind the oil and gas sector at a time when there was an urgent need for larger and better deposits of many metals and minerals.

In 10 years the world would “have to pay to move twice the amount of waste to get the same minerals to market”, he said. “We need to do it differently. We need a better way. We need to innovate.”
Innovation in oil and gas has transformed the energy landscape in the US, with fracking and horizontal drilling unlocking vast reservoirs of shale gas previously considered uneconomic to develop. By contrast innovation in mining has been incremental. Many methods have changed little except for the size of equipment used.

“Our industry is damned by the fact that our spending on innovation, research and development is one-10th that of the petroleum industry,” Mr Cutifani said.

“If we don’t start to bring innovation back and do a hell of a lot better on our cost structures and deliver returns, the major diversifieds will be subsidiaries of General Electric or some other conglomerate that has still got innovation in their vocabulary . . . We either pick the ball up and innovate or somebody will do it for us.”

Next week mining leaders gather in Cape Town for one of the industry’s most important annual events.

Companies have tried to draw a line under a period of poor returns after big investments in new projects and escalating costs, and as Chinese growth fears hit commodity prices.

Among miners that are innovating most successfully, Mr Cutifani praised Rio Tinto, which has invested in driverless trucks and trains – operated from several hundred kilometres away – to service its huge Australian iron ore mines.
AngloGold Ashanti, at which he was previously chief executive, was using technology to make its deep-level gold mines in South Africa safer and more efficient, he added.

Many miners expect declines in mined grades – the quantity of recoverable metal relative to waste rock – as reserves are depleted and discoveries become harder to make.

Mr Cutifani joined Anglo American last year and is trying to reverse years of underperformance amid concerns over its exposure to South Africa, where platinum miners are striking. Anglo reports annual production figures on Wednesday.

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