60 years of Optima - Anglo American/media/Files/A/Anglo...Merger and acquisition (M&A) activity in...

Cover:China’s People’s Liberation Army officers assemble in Ningxia Autonomous Region. The country is on track to become the world’s largest economy, marking a shift in global power. See article on page 6.PhoTo by GUo JIAN ShE/CoRbIS

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Printed by The Colourhouse. The paper is produced using a 100% chlorine-free (ECF) bleaching process and contains material sourced from responsibly managed and sustainable forests, together with recycled fibre, certified in accordance with the Forest Stewardship Council.

BRAZIL: building a brighter future CLIMATE CHANGE: in search of a global solution SOUTH AFRICA: the nationalisation conundrum 60 YEARS OF OPTIMA: a retrospective

optimaNoVember 2011

60 years of opTima 1951-2011

How CHina and india are leading a sHift in global eConomiC power

tHe migHt of tHe east

02 | Optima | NOVEMBER 2011

Welcome

The mining industry is heavily dependent on continued growth in China and India. Both countries are major users of the commodities Anglo American produces, and we do not envisage any long-term slowdown in demand. We are delighted that Sir Martin Sorrell has written for this issue on these “rapidly expanding superpowers” that are challenging the US for global economic dominance.

At Anglo American, we want to reduce our impact on the environment. Our feature on technology looks at how we are investing in innovation that not only will make our operations more efficient in the future, but could also reduce CO2 emissions. But collective action is also required. Governments, industry and other stakeholders must come together to help mitigate the effects of climate change. Yvo de Boer’s insight is thought-provoking. The former executive secretary of the UN Framework Convention on Climate Change highlights how a lack of political clarity and differing attitudes towards the issue are stalling any new international agreement.

Finally, I am proud that we are marking 60 years of Optima. Few corporate publications can claim such a heritage. I hope you will be as fascinated as I was to look back at some of the social and economic developments we have reported on over six decades – topics that have influenced our industry and the world.

contents

Cynthia CarrollChief exeCutive, anglO ameriCan 24 national pride

Could nationalisation provide an answer to South Africa’s economic and social problems?

32 optima at 60A trip down memory lane, looking back at major issues covered in Optima since its first issue in 1951

Editor-in-chief: Norman Barber

Anglo American plc 20 Carlton House TerraceLondon SW1Y 5ANEnglandTelephone: +44 (0)20 7968 8888E-mail: [email protected]

optima is produced by Redhouse Lane, 14 Bedford Square, London WC1B 3JA, England

Redhouse Lane production teamEditor: Rob JonesArt director: Tony BeresfordDesigners: Sam Cork, Helen GreenProject manager: Melissa Dickinson

Distribution enquiries: Alet [email protected]

34 future miningAnglo American is helping to shape the future of the mining industry through technological innovation

06 eastern promise Reflecting on how countries such as China and India are driving the global power shift from West to East

14 global changeWhy world leaders must pull together to solve the ever-increasing climate change problem

40 family affairA guide to platinum’s little-known sister metals, and how they help shape our modern lifestyles

03 NOVEMBER 2011 | Optima |

sir martin sorrell

adrian WooldridgeAubrey Matshiqi is a political analyst and research fellow at both the Stellenbosch Institute for Advanced Studies and the Helen Suzman Foundation. He was formerly a senior research associate at the Centre for Policy Studies in Johannesburg. His career has taken him from a Maths and English teacher to a government strategist and academic. He now writes a weekly column for Business Day, a monthly column for Engineering News, and regularly contributes to other publications inside and outside South Africa. see page 24

Yvo de Boer is KPMG’s Special Global Adviser on Climate Change and Sustainability and former Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC). He has been involved in climate change policies since 1994, helping with EU preparation in the lead-up to the Kyoto Protocol and organising several international conferences on the role of markets in sustainable development. De Boer is a Professional Fellow at the University of Maastricht. see page 14

aubrey matshiqi

yvo de boer

contributors

52 booK revieW Ann Bernstein’s new book asks whether business people should apologise for pursuing their vocations

44 booming brazil Carlos Alberto Júlio on how the South American nation is laying the foundations for a bright future

other contributors rob jones (page 20); tom Washington (page 34); alison coWley (page 40)

The opinions expressed by contributors do not necessarily represent the views of Anglo American. Provided that permission has been obtained from the editor-in-chief, and on condition that acknowledgement is made to Optima, newspapers and magazines are welcome to reproduce articles in whole or in part and to use illustrative material, except where copyright © is especially reserved.

Sir Martin Sorrell is the founder and chief executive of WPP, one of the world’s largest communications services groups. He has been an Ambassador for British Business, receiving a knighthood in January 2000, and in 2007 he was awarded a Harvard Business School Alumni Achievement Award. Sir Martin is a patron of the British Museum and a member of both the Corporate Advisory Group of the Tate Gallery and the International Advisory Board of the Russian Museum in St. Petersburg. see page 6

20 going greenanglo american’s future relies on

understanding and acting upon the risks climate change presents, including the cost of compliance with global policies.

the company is continuously looking for water and energy efficiencies in order to improve its environmental performance

Adrian Wooldridge is The Economist’s management editor and writes the Schumpeter column. He covers politics, social policy, and social and political events. Wooldridge regularly writes and speaks on subjects including China and India, the search for talent, business history, entrepreneurship and management, globalisation and the economy. He is the co-author or co-editor of five books, the most recent being Masters Of Management: How The Business Gurus And Their Ideas Have Changed The World – For Better And For Worse.see page 52

feed bacK and Win an ipad 2

In this issue of Optima you will find a reader survey asking what you think of the style and content of the magazine, where it could be improved and what subjects you would like to see featured. One respondent, selected at random, will win a top-of-the-range iPad 2. Please send your completed questionnaires to Redhouse Lane Communications, 14 Bedford Square, London WC1B 3JA, UK in the envelope provided by 31 January 2012. You can also complete the questionnaire online at www.surveymonkey.com/s/OptimaSurveyRedhouseLane.

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Merger and acquisition (M&A) activity in the global mining sector saw its busiest half-year in history, according to PricewaterhouseCoopers’ (PwC) mid-year report on mining M&A deals, in H1 2011.

But jitters in global equity markets coupled with caution from China could lead to a slowdown in activity for the remainder of the year.

Commenting on the report, entitled Riders on the Storm, PwC global mining leader Tim Goldsmith said that while a slowdown is on the cards, China is well positioned to lead a rebound in global mining M&A deals.

“Although a drop-off in deal-making is expected, it will not cease altogether as China’s demand for metals, supported by other emerging nations, continues to drive long-term fundamentals and is the most critical factor in formulating the commodity market and, therefore, mining M&A expectations,” he said.

PwC anticipates China will continue to acquire assets in gold and other precious metals, as well as iron ore, coal and base metals, particularly in Africa and Mongolia.

digest A look at recent news from Anglo American and the mining industry.

m&a activity to sloW

Iron ore vessel unloading in

Qingdao in China's Shandong province

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anglo american to taKe control of de beers Anglo American is to increase its current 45 per cent shareholding in De Beers, the world’s leading diamond company.

In a deal worth $5.1 billion, Anglo American will buy out the Oppenheimers' interest in the diamond business that the family has controlled for almost a century.

Buying out the Oppenheimers’ shareholding in full would take Anglo American’s interest in De Beers up to as high as 85 per cent. The Botswana government, however,

has a pre-emption right to raise its stake in De Beers from an existing 15 per cent to 25 per cent. If exercised, Anglo American's interest in the diamond miner would then be 75 per cent.

De Beers chairman Nicky Oppenheimer said: “This has been a momentous and difficult decision as my family has been in the diamond industry for more than 100 years and part of De Beers for over 80 years.

“Anglo American is the natural home for our stake as they have been major shareholders in De Beers since 1926 and have a deep knowledge of the diamond business.”

De Beers has struck an exclusive partnership with Historic Royal Palaces, the independent charity that looks after the Tower of London, for a new presentation of the Crown Jewels. The redesign of the jewels’ setting will be revealed to the public at Easter 2012 to coincide with the Queen’s Diamond Jubilee celebrations and the London Olympic Games.

de beers shoWs off croWn jeWels

in numbers:

16,000 Number of people De Beers employs in over 20 countries

57% Increase in revenue from rough diamond sales in 2010

$29.8 million Amount De Beers spend on community social investment in 2010

De Beers chairman Nicky

Oppenheimer

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anglo ameriCan in numberstop 10

Interest acquired by Anglo American in Peace River Coal in October, taking its ownership to 100 per cent

Turn to page 14 to read more about global climate change.

more info

26,500,000

25.17%

Annual tonnage of iron ore that Anglo American’s new Brazil-based Minas-Rio operation could produce in its first phase. Key licences and permits have been obtained, and secondary environmental licensing is under way. The project will permanently employ 1,300 people and create 3,500 indirect jobs.

3 The number of accolades won by Anglo American at the Nedbank

Capital Green Mining Awards in October, including Thermal Coal being named as joint winner in the environmental and socio-economic categories.

The Australian mining industry has criticised the level of financial support offered by the government to soften the impact of its escalating carbon tax.

Seamus French, chief executive of Anglo American’s Metallurgical Coal business, commented that the carbon tax was a threat to coal mining jobs in Australia because the government’s c.US$1.3 billion transitional assistance package was inadequate.

“The government’s assistance package represents less than 10 per cent of the US$18.5 billion carbon tax bill the Australian coal industry faces over the next nine years, compared to the 94.5 per cent the government is providing other trade-exposed industries,” said French.

tax threat in australia

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Read more about Anglo American’s climate change strategy on page 20.

more info

Operations like Anglo American’s Moranbah mine in Queensland may be severely impacted by Australia’s proposed carbon tax

anglo american snaps up all of peace river coal Anglo American has secured ownership of Peace River Coal by purchasing the 25 per cent of the Canadian coking coal miner that it didn't already own.

Peace River Coal comprises the Trend metallurgical coal mine and various exploration leases in British Columbia.

Seamus French, chief executive of Anglo American's

Metallurgical Coal business, said: "Peace River Coal is a large and high quality coking coal resource of approximately one billion tonnes, supported by well developed power, rail and port infrastructure.

"We see significant resource upside and plan to invest in further exploration studies to ascertain its full long-term potential."

Countries anD their Carbon DioxiDe emissions from energy Consumption (tonnes) 1. China 7,711

2. uniteD states 5,425

3. inDia 1,602 4. russia 1,572

5. japan 1,098

6. germany 766

7. CanaDa 541

8. south Korea 528

9. iran 527

10. uniteD KingDom 520 Source: International Energy Statistics, 2009 figures

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a shift in poWer to the east

Are America’s days as the world’s largest economy numbered? sir martin sorrell looks at

how booming trade in countries such as China and India will see the US joined at the top table.

was recently in Nassau, Bahamas, for a media conference and, as my taxi driver took me around the magnificent bay and harbour, we chatted. “This is all going to be redeveloped,” he told me. “All these old hotels will be

knocked down. The harbour is going to be re-dug.”I said: “Gosh, that’s going to cost a lot of money.”“$3.2 billion,” he answered. Intrigued, I asked: “Who’s going to provide that?” He replied: “The Chinese.”Later, we passed Nassau Cricket Club. I asked: “Do you still play cricket here?”He said: “Yes.” “I thought the kids like to play basketball.” “They do actually and we’ve got this Olympic-sized basketball court that’s just been built.”Again, I asked where the money came from. Perhaps I should have already known the answer.“The Chinese.”

It is a story familiar all over the world, as the Middle Kingdom strives to invest its massive foreign reserves. In embattled Greece, China owns a 35-year lease on the largest container port in Piraeus. Indeed, its coffers are probably big enough to buy a good chunk of Greece’s state assets, probably even the Parthenon were it for sale.

When the United States closed its airbase in Iceland, the first people on the phone seeking to take it over were… the Chinese. And then there are the 800,000 Chinese currently living, working and running businesses in Africa.

It is inevitable that China and other rapidly expanding economic superpowers such as India and Brazil will make their presence felt around the world. China, in particular, overtook the US recently to become the world’s number one energy consumer. India is not far behind. China lacks the resources to meet its surging needs, so it must go elsewhere for oil and gas, as well as seek land for food production outside its borders.


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previous pageWest meets East: the US and Chinese presidents Barack Obama and Hu Jintao meet at a conference in the White House, Washington, in January 2011

01 China remains reliant on imports from North and South America, with more than 60 per cent of soybean-based products imported from the US, Brazil and Argentina

02 The US remains predominant in many fields, including technology through companies like Apple and its products, such as the iPad

03 Until it was overtaken by China last year, Japan was the world’s second biggest economy. Headquartered in Tokyo, Sony is one of the world’s largest media conglomerates

04 US construction and mining equipment manufacturer Caterpillar plans to spend more than $1 billion on increasing its manufacturing capacity in China

economies in rapid groWthEvery time I go back to China and India – I try to as often as possible – the evidence mounts of the economic shift from West to East. Turn on the television and economic luminaries are arguing about whether India will grow at an annual 7 per cent or 8.5 per cent – while western economies are struggling to hit 1 per cent or 1.5 per cent. China’s 12th five-year plan will require 7 per cent compound growth (the 11th plan demanded 7.5 per cent, but they did closer to 11 per cent). And it’s not even that they want economic expansion at all costs; Beijing’s state-directed capitalism is as much about balanced growth and stable consumption.

In India, you can see an economy on fire: every other vehicle on the roads is a massive truck delivering more cars, more goods, all on the most appalling roads. They’ve got the cars, they just haven’t got around to building the highways

to accommodate them properly yet. And the more cars they have, the more problems they have. In Mumbai, it isn’t just the mansions of the super-rich that take your breath away; new housing for middle-ranking executives is almost as palatial.

All this has profound implications for Washington. How does the United States feel about being talked about as a future number two or three behind China and India? Can a nation which for more than a century has thought of itself as exceptional – the model for robust democracy and the free market – come to terms with being a mere runner-up, the bronze medallist on the economic podium? More to the point, how does it feel to see a communist country parking its money in the Bahamas?

In a way, we have been here before. In the 1980s, as more fleet-footed Japanese car makers like Toyota threatened

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America’s stodgy Big Three, people talked of the US being finished. Japan was going to take over. There was much anti-Japanese rhetoric and a sense of wounded pride. Then Ronald Reagan rode to the rescue and, 10 years later, Japan entered an economic ice age from which it has yet to emerge.

It’s going to be a tougher haul now than it was against Japan. The population numbers, the unstoppable growth figures and just the immense will to succeed are all against the US – all the more so as Washington struggles with its twin deficits.

america’s leadership in questionThere can surely have been no greater wake-up call for America than the recent Standard & Poor’s downgrade. Yet still, progress has been painfully slow. While the latest deal on the budget deficit kicks the can down the road, it doesn’t solve the problems. America will only face the music in 2013 after the presidential election.

It is trite to say it, but it’s all about leadership. If Barack Obama gets re-elected – and the odds favour him because he’s a great candidate – then expect another four years of deadlock and 11th-hour wrangling with the Republican-controlled House and the Senate.

There is also the question of whether Obama has accurately judged the American psyche, or whether he is dragging the US too far to the left, too far from its political centre of gravity. The countervailing extreme right-wing

“it is inevitable that china and other rapidly expanding economic superpowers will make their presence felt around the world. china overtook the us recently to become the world’s number one energy consumer. in india, you can see an economy on fire.”sir martin sorrell

go West: an abC of ameriCa’s strength

The economies of the East may be on the rise, but the US still boasts global dominance in many fields.

apple: World’s most valuable Officially the world’s most valuable brand, Apple has led the way in the global computing boom. The California-headquartered business dominates the MP3 player and tablet markets with its iconic iPod and iPad respectively, while the past four years have seen approximately 73 million iPhones sold globally. At the time of going to print, Apple was the second largest publicly traded company in the world by market capitalisation and the largest technology company in the world by revenue and profit.

boeing: transforming air travelSeattle-based Boeing is set to revolutionise the aviation industry in the shape of its 787 Dreamliner

aircraft (pictured). Widespread use of durable plastic in the manufacture of commercial planes should reduce fuel consumption by 20 per cent. The first 787 Dreamliner – estimated to cost $200 million – was delivered to Tokyo in September 2011 to join Japan’s All Nippon fleet. More than 800 orders have been placed for the aircraft, with Japanese airlines accounting for some 90 planes, Chinese airlines for more than 60 and Indian airlines for nearly 40.

caterpillar: heavy machinery leadersCaterpillar – the world’s leading manufacturer of construction and mining equipment – ensures the US retains its grip on the global market. Despite stiff competition from Japanese machinery giant Komatsu, the Illinois-based company recently announced a global sales increase of 34 per cent.

02 Eastern expansion: the US technology firm Motorola’s Hong Kong plant. Global growth of mobile subscribers is led by China and India

01 Sign of a shift in power within the East? In 2011, South Korean car manufacturer Hyundai began advertising in London’s Piccadilly Circus, replacing Japanese technology group Sanyo, which had been advertising there since 1984JO

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responses from the likes of the Tea Party certainly suggest as much.

Perhaps a second and final term will give Obama a chance to be more expansive and conciliatory, to get things done in a more practical way. Even if that were to happen, there is little room to manoeuvre. Some 85 per cent of the US budget is taken up by Medicare and defence, so a cash-strapped Washington is going to have to juggle its priorities. Some adjustments to military spending are inevitable.

All this leaves a vacuum. The new economic superpowers of the East will try to use these situations to their advantage by plugging the gaps and errors in American policy. As a result, the Chinese and Indian businessmen and politicians are considerably more confident than they were a decade ago. They saw how the West screwed up with the financial

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crisis of 2008; now they are less reticent in saying that the US and Europe need to get their act together, less likely to swallow western criticism.

Indeed, they may be getting a bit over-confident. The more successful you become, the more arrogant you become, the more demanding. Whatever your nature, you’re going to be concerned about your borders. You’re going to look at parts of a country that you used to own, which you don’t own any more.

defence and aircraft expansionThe Americans have been paranoid about Chinese military expansion for years, especially Beijing’s claim that it controls the South China Sea. Witness Washington’s twitchy reaction a few years back to Chinese investment in the Galileo satellite, which could be used for military purposes.

At a time when the US and Britain are obliged to question their defence spending, Chinese defence spending is surging. Its military budget has tripled since 1996, although it is still a small fraction of America’s. In Dalian, a 60,000-tonne former Soviet aircraft carrier has been reconditioned for the Chinese Navy as its first such carrier and is now undergoing sea trials.

Perhaps most symbolic of the world’s changing face is the last Shuttle flight. It signalled a halt to an adventure that began with President Kennedy’s vow that America would be the first nation to land a man on the moon – itself a response to the Soviet Union’s Yuri Gagarin’s pioneering space flight.

This sense of finality contrasts with China’s burgeoning space exploration, which only began in 2003, with its first astronaut. The first part of a project that will produce a Chinese space station has just been successfully launched. China’s own space station is expected to open in 2020, just as the US-led international space station closes.

confidence and co-operationThis new attitude also means China can flex its muscles economically and politically. That was manifest when a Hong Kong Airlines order for 10 Airbus A380s was blocked on Beijing’s orders – a protest against the EU’s emissions trading scheme being imposed on foreign airlines. Certainly, the more investment China makes in Europe, the less inclined will Brussels be to pursue policies against Beijing’s interests.

This can be tricky for western business in strategically important industries wishing to open plants in China. Yes, they can build, but the intellectual property rights will stay in China. Conversely, Chinese companies on the acquisition trail in the US often encounter problems.

And corruption hasn’t gone away in India or China. Of course, there is graft in America, Britain, France, Italy and Russia. Perhaps India is finally getting to grips with its problems after Anna Hazare called off his 12-day hunger strike on the promise that a powerful anti-corruption ombudsman will be appointed.

There will be friction, caused as much by the losers as the winners in this global economic shift. But on the positive side, if you go back into Chinese history, you don’t see expansionism. The Chinese are very sensitive to what’s going on; they change and adapt quickly.

Beijing’s new-found confidence on the world stage is expressed subtly. The Chinese regard their foreign investment not as triumphalism, but as offering help – a way of repaying countries for past favours. Wen Jiabao, the Chinese prime minister, speaks assuredly about stable development of the world economy and coming to the aid

01 China’s first aircraft carrier, currently undergoing sea trials, is anchored at the north-east port of Dalian

02 A mechanic assembles motorbikes at the new Piaggio manufacturing plant in Hanoi, Vietnam. The Italian company also plans to increase production in India in late 2012, with the first Vespa models to be exhibited at the Delhi Auto Expo in January 2012

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of European nations embroiled in the debt crisis. China, he says, will continue to buy European sovereign debt. It needs to so that European consumers can continue to afford his country’s products. The Chinese want to be co-operative; they don’t want to be threatening. They want to help and invest. They want to exchange knowledge and information.

america’s place in the World economySo will the United States turn out to be a good loser? It will be tough accepting that a lower position in the world economic table is both honourable and dignified –

as Germany and Britain have been obliged to do, the former excelling in engineering and the latter in financial services.

Certainly it would be foolish to write off the US just yet. Its size alone guarantees its future: America’s GDP is around $15 trillion, while China’s is still only $5 trillion. Then there is its immigrant culture and a young, ambitious population; its entrepreneurial spirit; a large, uniform middle class; its capital markets; and its vast natural resources.

People in the rising countries of the East still share a great affinity with the United States, especially with its culture, ideas and education. Zhang Ruimin, boss of Chinese appliance maker Haier, is an ardent follower of Jack Welch. Anil Ambani, the Indian tycoon, told me his children know America better than they know Britain. They are probably more likely go to an American university than a British one.

There’s a tremendous admiration for US education. Ratan Tata, chairman of Tata, has given $50 million to Harvard Business School, where he studied in 1975. Anand Mahindra, vice-chairman of Mahindra Group, has given $10 million to Harvard’s humanities centre. Nitin Nohria, the Dean of Harvard, is in fact Indian-born.

Obama has said: “I do not accept second place for the United States of America. As hard as it may be, as uncomfortable and contentious as the debates may be, it’s time to get serious about fixing the problems that are hampering our growth.”

Despite the rhetoric, accepting second place for the US may not be a question of “if”, merely a question of “when”. The answer is a very precise 2016, according to the IMF, though others put it nearer 2025. Quite how America deals with that and how it ensures its continued world-leading position and prosperity for its citizens depends, as I have said, on leadership. Coming to terms with the possibility of no longer being number one will require resilience and strength – probably more than is required to actually be number one.

Whatever happens, America’s democratic traditions will remain a model for freedom around the world. Its unrivalled educational institutions will be admired and favoured by the world’s new elites. Its entrepreneurial chutzpah and innovation may prevail, and there will still be much for the US to be proud of. But the East is breathing down its neck, ambitious and hungry for the economic power. The US may find itself being joined at the top table sooner than it thinks.

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“chinese and indian businessmen and politicians are more confident than they were a decade ago. they saw how the West screwed up with the financial crisis of 2008; now they are less likely to swallow criticism. indeed, they may be getting a bit over-confident.”martin sorrell

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looKing for a solution

The last United Nations Framework Convention on Climate Change (UNFCCC) conference in Cancún, Mexico, built on the outcome of 2009’s conference in Copenhagen in crafting an

implementation agenda. yvo de boer, formerly the executive secretary of the UNFCCC and now KPMG’s global adviser on sustainability issues, asks the questions that need to be answered before the global community can pull together.

oliticians and business leaders talk about green growth and sustainable economic growth as a path we should be stepping down. But how many politicians truly understand how this will work on a national level? Getting to grips with the issue of climate

change requires a fundamental shift in the nature and direction of economic growth. To do that effectively, we need to address it on a global scale.

Governments are struggling on how to do that. They are asking if it is possible to combine a healthy rate of economic growth, which is vital to developing countries facing the huge challenge of poverty eradication, with a steadily growing population with rising expectations, while at the same time reducing the pressure on the environment. How do you square that circle?

Most governments see an international treaty as an essential step on the way forward, the aim being to limit the growth of emissions or, in the case of industrialised countries, decrease emissions. Negotiating that, and crafting a treaty that differentiates the obligations for different

categories of countries while also mobilising financial resources to allow developing countries to shift the direction of their economic growth, will be a huge and complicated challenge.

In some quarters, the greening of the economy is seen as a threat rather than a boost to economic growth. Yet many countries – China, South Korea and, to some extent, the US and certain European nations – have taken advantage of the recession to put in place recovery packages that allow them to shift their patterns of economic growth.

The business leaders I meet with daily are calling for clarity and a sense of direction – a long-term perspective from their governments that will allow them to invest with greater certainty. There is a desire to change, but they also need answers.

They are looking to governments, therefore, to establish clear rules of the game. They need stable long-term regulatory frameworks to stimulate investment in bringing technological solutions to the market and to support the deployment of such new technologies. What kind of emissions goals are their governments going to


above Yvo de Boer during a summit in Warsaw, Poland, during his time as executive secretary of the United Nations Framework Convention on Climate Change

commit to? And they need appropriate transitional arrangements to allow business to adapt to huge structural change to the world’s economy.

mobilising developing countriesThere are different hurdles to overcome in different constituencies. As recently as 10 or 15 years ago, most developing countries felt climate change was caused, and promoted, by the West as an issue that was mainly of interest to developed, industrialised countries. Now, there is much broader recognition that this is a critical global issue and is likely to affect developing countries perhaps even more significantly than industrialised countries because of their greater susceptibility to, and more limited ability to deal with, the impacts.

The big political question that needs to be asked is how we balance our responsibilities and commitments in an equitable way? Greenhouse gases stay in the atmosphere for hundreds of years, which means the carbon-emissions issue has been caused by industrialised countries from the time the Industrial Revolution in Europe took off in the mid-18th century. This is why many developing countries

still take the line that they did not initiate the problem and, therefore, industrialised countries should deal with it. The developed countries acknowledge the sense in this – but point out that the economies of China, India and major developing countries are now so huge, and are still growing quickly, as are their emissions levels, that we can only find an equitable solution to this issue if such countries are brought on board to become part of the solution.

It’s important to remember that the 2009 United Nations Climate Change Conference in Copenhagen brought about the Copenhagen Accord, a significant political statement that provided us with the architecture and infrastructure for a long-term response to climate change. Many fundamental questions were asked in Denmark. What is the maximum temperature increase we are working towards? What is the nature of obligations that countries adopt? Are we going to mobilise financial support for developing countries and in what amount?

The conference that followed, in Cancún in November–December 2010, designed a roadmap to turn the political consensus that was encapsulated in the Copenhagen report into a working agenda. That agenda now must be taken

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forward in this year’s conference in Durban in South Africa. It relates to how country-specific commitments are going to be formulated, monitored, reported and verified. What will be the role of market-based mechanisms? How is financial support to developing countries going to be organised? What activities are going to be undertaken in context of a national plan?

establishing a neW treatyTwo major issues dominate the debate from a political point of view. The first is around a new international treaty on climate change. Are we going to see one? Will it include legally binding obligations, and to which countries will they apply? The second issue is on the future of the Kyoto Protocol, which has no end date, only commitments for an initial period that ends in 2012. Developing countries have made it clear they want to see an extension, but Japan, Canada and Russia are among those that see little point in continuing a legal agreement as long as the US refuses to be a part of it.

I don’t believe the US will change its standpoint any time soon – though it has stated that it is willing to make a legally binding commitment to reducing its own emission levels, providing other major economies such as China and India do likewise.

So we need to find a way to formulate a new international agreement that encapsulates the US and other countries. A great deal of the architecture of the Kyoto Protocol can be transferred into a new global approach that involves all countries. The problem we’re having is getting countries engaged and focusing together on the issue of climate change. On one side, the US maintains it will only adopt a legally binding international obligation if other industrialised countries show willing; on the other side, developing countries are unwilling to take on the same obligation as industrialised countries because they see themselves as having less responsibility for causing the problem in the first place.

The question is how can countries transform their commitments into a national strategy that makes a meaningful contribution to solving the problem while

“business leaders are calling for clarity from governments to allow them to invest with certainty. there is a desire to change, but they also need answers.”yvo De boer

01 Rosneft’s Yuganskneftegaz operates the second largest oil production complex in Russia. With their emissions levels rising, it is imperative that emerging countries such as Russia buy in to any global agreement on climate change

02 Rapidly growing populations – China has 1.34 billion inhabitants and counting – will take their toll on energy demand. Already, the country consumes the equivalent of more than 10 barrels of oil a person – although this is just one-sixth of the figure in the US

03 Water from Lake Kivu, on the border of the Democratic Republic of Congo and Rwanda, has a gaseous chemical composition of methane and carbon dioxide owing to interaction with a volcano. Rather than being released into the atmosphere, the methane is extracted as part of an offshore project to produce energy

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at the same time ensuring it doesn’t result in significant economic disadvantage because other countries are not pulling their weight?

alternative energy sourcesAny new agreement must encapsulate carbon pricing. What business needs from governments are clearer carbon-price signals. Unless you can successfully put a price on carbon dioxide (CO2) or greenhouse gas emissions, it will be impossible to tackle this issue in the long term.

Now is the time for industry to look for alternative energy sources to protect us in the future. China, for instance, has devoted a significant part of its economic recovery package to invest in wind, solar and battery technology. More interesting is its five-year plan, published earlier this year, in which the Chinese government makes it clear that the current economic model is not sustainable for growing the national economy at anywhere near the current rate.

The five-year plan recognises that the population boom, the movement to the cities on a massive scale, the increasing material expectations and demands of a burgeoning middle class, and the hundreds of millions who need to be lifted out of poverty, especially in the rural areas, will bring constraints in terms of natural resources, energy and infrastructure. In consequence, it sets out the need for substantial improvements in energy efficiency, a shift towards sustainable cities, and a more intelligent use of natural resources.

corporate benefitsIn 2010, KPMG commissioned The Economist Intelligence Unit to look at the extent to which CEOs around the world have placed sustainability and climate change on their business agendas. We found that, even in the middle of an economic crisis, most companies take these issues seriously. There are increasing numbers of companies developing agendas, or planning to start one. Integrating sustainability into the wider business plan is very clearly moving from being a nice-to-do gesture to an essential part of the corporate strategy.

CEOs are human beings just like the rest of us, and they see these trends evolving and how they are likely to affect world growth from an environmental and economic growth point of

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Climate Change: the effeCts anD the ConsequenCes

Extreme changes in climate have been observed, varying from longer and hotter dry periods to more powerful storms and cyclones – trends that are set to continue. In some regions of Africa, for instance, the average annual rainfall has fallen and the total available water has reduced by up to 60 per cent, affecting soil moisture, while the average Arctic temperature has increased by almost twice the global rate in the past 100 years. In contrast, severe flooding in places such as Bangladesh, China, Mozambique and Europe over the past 15 years highlights the increasing intensity of precipitation. The potentially catastrophic consequences of these changes include rising sea levels, reduced crop yields and freshwater access, disruption to food supplies and an increase in diseases, while warmer temperatures affect animal migration and, in some countries, the displacement of populations, which can speed up the extinction of endangered species and put human health at risk.

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view. Many companies recognise that getting to grips with climate change and sustainability can make good economic sense from a bottom-line viewpoint, by using energy or water or natural resources more prudently and removing inefficiencies from the supply chain.

Companies are also starting to recognise that being environmentally responsible is important from a brand perspective. Their customers are demanding information about the sustainability of their products and supply chain. Some companies are seeking out the new opportunities by proactively making sustainable products and positioning themselves more sustainably in an international market.

While the increased interest from the private sector is encouraging, and there continues to be considerable communication within the private sector – all the major mining companies, for example, have signed up with the

International Council on Metals & Minerals, which was founded a decade ago to improve sustainable-development performance in the mining and metals industry – at a national level, I am disappointed about the lack of corporate engagement in crafting that collaborative international approach to address climate change.

An inter-governmental process that offers little or no opportunity for the business community to engage is a huge problem for two reasons. First, many of the solutions that we need to deploy when tackling climate change are in the private-sector domain. Secondly, an international climate-change regime could have huge implications for the private sector – in either positive or negative terms.

overcoming the fear of changeThe first important challenge, all over the world, is to give people an understanding of what the issues are and how they should be approached. In respect of the US, we need to craft an agreement that will be seen by American people and politicians as fair – and to a large extent that depends on how China engages in the global effort to address climate change. There’s a huge fear in the US, which continues to permeate its domestic politics, that if it acts on the issue of climate change and China does not, or does so inadequately, there will be an accentuation of the shift in economic and employment activity from the US to China.

There are many countries that feel we need a new legally binding agreement. There are others that are not quite ready to sign on the dotted line until there is more clarity surrounding architecture. Personally, I do not expect a new international treaty to be the outcome of the meeting in Durban.

In conclusion, I think we need more operational clarity on what commitments our governments are going to be making, what financial support is going to be available to developing countries to deliver on those commitments, what reporting is going to be in place, and what is going to be the nature of market-based mechanisms. I hope Durban can clarify the functioning architecture of a new international approach to climate change, but having that discussion is complicated by what is or what is not going to be the future of the Kyoto Protocol.

More than 80 countries – at least 40 developed and 40 developing countries – have already committed to take action to reduce their emissions by 2020. Those countries account for more than 80 per cent of global energy-related CO2 emissions. This tells us that the issue is not a lack of willingness to act. That is being demonstrated by countries on an individual basis.

The challenge is how we can pull together to produce an international agreement that will allow for effective global action.

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01 Chinese workers assemble a wind power generation turbine in east China’s Shandong province. China has surpassed the US as the world’s foremost wind energy producer

02 A flexible tube for CO2 at Vattenfall’s power plant in Spremberg, Germany. The site is a pilot project for carbon capture and storage, the world’s first to take toxic emissions from coal and bury them in the ground

03 Hybrid Toyota Prius cars on the assembly line in Japan. Hybrid cars can have near-zero greenhouse gas emissons

04 The impact of climate change is highlighted on a world map at 2009’s UN World Climate Change Conference in Copenhagen

“how can countries make a meaningful contribution to solving the problem (of climate change) and ensure it doesn’t result in economic disadvantage?”yvo De boer

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a clear focus on the future

our climate is changing. The response from international governments might be muddled in terms of who is responsible, but Anglo American is clear.

The future of the business rests on an understanding of the risks and the action that needs to be taken.

There are three business risks in Anglo American’s eyes: one is the costs of compliance with climate change policies; the second is the risk to markets; and the third is the physical impact of climate change on operations and the surrounding communities. The most immediate concern is the first.

The pricing of carbon is in place or planned in Europe, New Zealand, the US and South Africa, but it is Australia’s proposed carbon-pricing scheme that will be particularly challenging, especially the clauses covering fugitive methane emissions.

Mined coal often contains methane, a greenhouse gas that occurs naturally in mines and is more than 20 times as damaging to the environment as carbon dioxide (CO2). To avoid explosions, it is released in either a concentrated or diluted source. Anglo American pipes methane from its Capcoal and Moranbah North mines to power stations to create electricity,

but the methane that is mixed with ventilation air to make it safe during the mining process is too dilute to be used and must pass into the atmosphere. Although it’s very weak, the quantity is large enough that it accounts for the bulk of Anglo American’s carbon footprint in Australia.

Samantha Hoe-Richardson, Anglo American’s head of sustainable development and energy, explains there is no truly commercially viable technology available to address this issue. “We have challenged the Australian government on this, as well as on the fact that the so-called ‘gassy’ mines will be penalised, as it won’t achieve a better outcome.”

Despite the technical and economic obstacles, working with long-term platinum partner Johnson Matthey, Anglo American is researching a palladium catalyst-based system to tackle Ventilation Air Methane (VAM).

A decision will be made next year on the development of a pilot plant.

engaging With governmentHot on Australia’s heels is South Africa, which issued a discussion paper on carbon taxation in late 2010.

“Our response here has been to ask what is in the country’s best interests,” reflects Hoe-Richardson. “What does a good climate policy in South Africa look like? How can the country transition from a largely coal-based economy to a low-carbon one? To put in a scheme such as the one under consideration in Australia would seriously compromise South Africa’s economic and social development.”

Anglo American has responded both individually and as a member of the Industry Task Team on Climate Change. “We are in a unique position to partner with government because we are a major coal supplier and the largest producer of platinum group metals, which we believe can facilitate low-carbon technologies, as well as create decent jobs and export income.

“We want equitable policy that benefits the environment and society, and allows businesses to play an effective role, with governments giving incentives and backing for developing commercially available technology.”

Within 10 years, many carbon pricing schemes will be in place. rob jones looks at how Anglo American is taking forward its climate change strategy.

“ultimately, we would like our people at every level to understand what they personally can do to make a difference.”samantha hoe-riCharDsonhead Of sustainable develOpment and energy


South America’s challenge, meanwhile, is to reduce deforestation and secure energy with minimal environmental impact. This will be a considerable challenge given the region’s historical dependence on large-scale hydropower.

For instance, the construction of the Belo Monte Dam in Amazonia in Brazil has been criticised for its potential impact on fish stocks and indigenous communities.

assessment and measurementAnglo American’s new climate change strategy seeks to address these risks and capitalise on the opportunities.

The first phase is about “getting our house in order”, as Hoe-Richardson calls it, with a key element being a new programme to promote operational excellence in the way it manages key environmental risks. ECO2MAN provides a structured approach to help sites manage energy and carbon emissions and identify opportunities for innovative savings projects. It will help each and every site fully develop carbon-abatement cost curves. Based on their sites’ life-of-mine plans, energy champions will consider what their future energy demand and carbon footprint will look like, before setting savings targets, identifying savings projects and putting in place measurement systems.

“I believe ECO2MAN is industry leading and possibly the most comprehensive such programme of all

01 Copper, such as that produced at Anglo American’s Los Bronces mine in Chile (pictured), has many environmental uses. It is used in wind turbines and electric and hybrid vehicles, and could become a key component in future solar energy systems

02 Environmental monitor Riaan Van Zyl takes a surface water sample at Sandsloot River, close to the return water dam at Mogalakwena mine, which is part of Anglo American’s Platinum business

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our peers,” says Hoe-Richardson. “Our initial focus is engaging leadership in why this programme is important and how they can make a difference. It has to be driven by managers and the senior teams. But ultimately, we would like our people at every level to understand what they personally can do to make a difference ”

Alongside ECO2MAN, a new Water Efficiency Target Tool (WETT) is being used along the same lines to improve sites’ management of water, making Anglo American more resilient to the risk of scarcity of water supply, one of the effects of climate change.

A WETT pilot within Anglo American’s Platinum business unit in 2010 resulted in a 10 per cent improvement in water efficiency over 12 months. “It raised awareness, as we were asking people to do things differently,” says water specialist Vinesh Dilsook. “We established water communities at the operational level and encouraged people to focus on

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water-saving projects. We discussed water-use trends and abatement plans and the committees shared best practice.”

investing in researchAnglo American’s carbon footprint of 20 million tonnes is dwarfed by that of its customers when they use its coal – about 170 million tonnes. The company is investing in research into technology to save carbon for both itself and the end-users of its products.

“Given the world’s escalating demand for energy, coal will remain an essential part of the energy mix for the foreseeable future, particularly in developing countries where it supports their economic and social development,” says Hoe-Richardson. “The challenge is to make the use of coal more sustainable. While we are supporting the development of some of the associated technologies that may otherwise struggle to make it to market, the challenge is so great that our approach has to be a collaborative one.”

In addition to the VAM research, Anglo American is working with MBD Energy in Australia on algal systems to capture CO2 in coal plants, and is involved in the FutureGen near-zero emissions coal-fuelled power plant in Illinois in the US, as well as the CO2 CRC carbon capture and storage project in Australia. Within its own operations, the company has installed mobile methane flarers at New Denmark colliery in South Africa, is using biomass in the kilns at Codemin in Brazil, and is looking at solar power in South Africa, and wind and geothermal in Chile.

The need for greener energy presents broader supply opportunities for resources companies. Copper is the most cost-effective of the metals which

fossil fuels. It has also launched a 100 million rand (c.$13 million) fund to invest in platinum-based technology companies in South Africa.

community partnershipsOutside the perimeter walls of its operations, Anglo American is encouraging energy efficiency among local communities.

Its Zimele small-enterprise programme finances entrepreneurship in South Africa through business loans, with a target of creating 25,000 jobs by 2015. In November 2011, the new Zimele Green Fund was launched with an initial commitment of 100 million rand for environmentally sustainable business projects.

Anglo American’s Government and Social Affairs and its Safety and

01 Anglo American’s Metallurgical Coal’s Neville Hutchinson and EDL operations supervisor Tom Dutton examine a gas-fired generating set in Queensland, Australia. The two companies partnered to open a waste coal mine gas power station at Moranbah North in 2009 that is delivering enough low-emission, clean energy to power nearly 50,000 homes

02 Platinum group metals can be used in fuel cells (pictured), which help convert energy at high efficiencies, and as an enabler of renewable energy

can be used to carry electricity. It is used in wind turbines, while hybrid and electric vehicles contain up to three times more copper than their internal combustion counterparts. Solar energy companies are also looking at copper-based solar photovoltaic systems to replace crystalline silica.

Platinum and its associated group metals (PGMs) can help to reduce greenhouse gas emissions and save energy. The catalytic properties of PGMs reduce the pressure and temperature requirements of many industrial applications, significantly reducing energy demand. PGMs can also be used in fuel cells which are able to convert energy at high efficiencies in an array of applications, from palm-sized batteries to providing power at multi-megawatt scale. They can also act as an enabler of renewable energy.

In South Africa, Anglo American’s Platinum business is working with the Department of Science and Technology to develop a market for, and local manufacturing of, fuel cells, which create jobs and reduce reliance on

15% Amount by which annual methane emissions will be reduced thanks to a flaring project at New Denmark colliery in South Africa. The project will generate more than $8 million in revenue in the first decade through the sale of Certified Emissions Reduction credits under the Kyoto Protocol’s Clean Development Mechanism.

9% The percentage of Anglo American’s total greenhouse gas emissions that come from its copper, nickel and Brazilian iron ore businesses. These businesses account for 38 per cent of the Group’s total energy use; their comparatively low emissions rate is thanks to electricity from renewable sources, such as hydro-electricity.

22 million Litres of water used each day at Mogalakwena in South Africa, the world’s largest open-pit platinum mine. Anglo American is involved in a project to raise a local dam and construct a 600-kilometre-long water-supply pipeline, which will enable the site to access a further 14 million litres a day until 2018. Half of this will be for domestic use, giving up to two million local people clean, safe and reliable water for the first time.

the consequences [of climate change] may not be seen until much further into the future, but anglo american’s assets are long term and preparing climate-adaptation measures early will be cost-effective.

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Sustainable Development functions are supporting studies in two areas where the Green Fund could play a part. The first is a community energy study looking at the installation of basic solar water heating and ceiling insulation in low-income homes in mining communities. Such basic changes can give residents access to clean energy, improve health (by reducing condensation and indoor fuel use), and take electricity demand off the grid at peak times. Anglo American’s feasibility work will assess at what scale such a project could be economically viable. Through the Green Fund, small businesses could be supported to manufacture and install these heating and insulation systems.

The second area is green charcoal. Produced from agricultural waste, “biochar” can be put into the ground to store carbon and improve soil productivity. Trialled in Senegal by NGO Pro-Natura, biochar has been proven to improve crop yields by up to 200 per cent.

“It’s good practice to pass something back to the community

after our mines have closed, and green charcoal could help,” says Hoe-Richardson. “An entrepreneur or farmer could buy the kit, perhaps using a Zimele Green Fund loan, and sell the green charcoal to us to rehabilitate the land. We create a positive legacy and improved stakeholder relationships, Zimele gets a good return on investment – it was money sites would have spent anyway – and local farmers are happy because their crop yields are up, and jobs are created.”

thinKing long termIn combating the third risk – the physical effects – Anglo American has been working with the UK Met Office and Imperial College London to consider its sites’ exposure to climate change.

Droughts and flooding may impact production and increase the instances of disease, which, in turn, affects the workforce and local communities, while sea-level changes could disrupt distribution of products. These consequences may not be seen until much further into the future – 15 or 20

years away or more – but Anglo American’s assets are long term and preparing climate-adaptation measures early will be cost-effective.

“Climate science is incredibly difficult to attach a probability to, but there are trends,” says Hoe-Richardson.

“From the work we have done at one of our sites, we believe we will see wetter wet seasons and drier dry seasons, with perhaps an overall trend to drier, but we need to make sense of these assumptions. We’re asking ourselves which sites are most exposed and when, and we’re going to create a risk model to help those sites put management plans in place.

“We will then look at how we can manage all this scientific data to benefit the communities around us who are as equally exposed.

“It may feel like a long time before any of us will see the impacts on the environment, but, really, it highlights that we are only at the beginning of our journey when it comes to dealing with climate change.”

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Rob Jones is the editorial adviser on Optima. He is an award-winning journalist with more than 10 years’ experience editing and reporting for corporate titles on subjects including energy, resources, construction and engineering.

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road to noWhere?

Is nationalisation an answer to South Africa’s social and economic woes? Political commentator aubrey matshiqi

considers what support there is for such a policy – and the likely impact it

would have on the country.

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n 2006, Kgalema Motlanthe, deputy president of South Africa and of the African National Congress (ANC), gave a keynote address at the 62nd anniversary celebrations of the ANC Youth League. What stood out in his speech was the call for free

access to education and health, something the ANC has always agreed about but struggled to achieve given domestic and global economic conditions.

Motlanthe proposed setting up state mining companies whose profits would be invested in health and education. Yet the argument is not clear cut. As recently as October, planning minister Trevor Manuel claimed nationalisation was a “seriously bad idea”, stating that the country had no fiscal power to take over its mines and is “desperately” in need of private investment.

Motlanthe’s argument must be understood in the context of South Africa’s population dynamics. About 60 per cent is under the age of 30, which would ordinarily be a cause for celebration because it means our country is pregnant with potential and alive with possibility. However, the life expectancy of a South African is between 48 and 52 years; South Africa’s young population is also dying young.

Why nationalisation has its supportersIn 2008, the national conference of the Youth League called for the nationalisation of mines, banks and monopoly industries. Its president, Julius Malema, has become the voice and face of nationalisation in South Africa and the world. Why does the call for nationalisation resonate with so many young people inside and outside the Youth League?

There are three main reasons. First, it is South Africa’s young, particularly those who are black and female, who bear the brunt of poor social and economic conditions. With youth unemployment at over 50 per cent, and a failing education system, conditions of underdevelopment have become the defining feature of life for too many young South Africans. Secondly, Malema has become a medium through which South Africans transmit their prejudices, preferences

“democracy, given the history of social, political and economic marginalisation of the black majority, must deliver a better life for all south africans.”aubrey matshiqi

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previous page Miners walk between elevator shafts in the world’s deepest gold mine, TauTona

01 South Africa’s unemployment rate remains stubbornly high, with at least one in four people out of work and youth unemployment exceeding 50 per cent

02 Anglo American’s Sishen mine in Kathu in the North-West Province is a major source of employment in a region of high joblessness. Many people, however, naïvely argue that mines should be nationalised, with profits invested in health and education

and aspirations. Thirdly, Malema is using the nationalisation debate as a proxy argument for his own political preferences.

The nationalisation policy argument may be his way of expressing his unhappiness about the leadership of president Jacob Zuma. In positioning nationalisation as a solution to South Africa’s developmental challenges, Malema seems to want to imply that, by contrast, Zuma and the ANC are not committed to the goals of the Freedom Charter.

The Freedom Charter, the blueprint for a post-apartheid society adopted in 1955, is clear: “The national wealth of our country, the heritage of South Africans, shall be restored to the people; the mineral wealth beneath the soil, the banks and monopoly industry shall be transferred to the ownership of the people as a whole.”

The Youth League’s invocation of this clause is in line with its vision of “economic freedom in our lifetime”. It argues that the end of apartheid delivered political, though not economic, freedom. A gap has developed since 1994 between the procedural and substantive dimensions of

South Africa’s post-apartheid democratic order. In other words, democracy must be more than a set of democratic procedures, rights and freedoms. Given the history of social, political and economic marginalisation of the black majority, it must also deliver a better life for all South Africans.

If this does not happen, South Africa might end up in a situation where, as Argentinian sociologist Atilio Boron puts it, “democratic arrangements are increasingly perceived as political rituals deprived of any relevance to the everyday life of the citizenry”.

People think this would materialise as a loss of confidence in the ruling ANC. In fact, the gap between the procedural and the substantive may also undermine confidence in the democratic project itself. This gap may even undermine the goal of creating a non-racial society because of a loss of confidence in the reconciliation project. What is at stake, therefore, is the stability of our democracy.

differing vieWsThe Youth League is convinced that the economic clause of the Freedom Charter unambiguously calls for the nationalisation of mines. “Nationalisation of mines means the government’s ownership and control of mining activities, including exploration, extraction, production, processing, trading and beneficiation of mineral resources in South Africa,” it wrote in a February 2010 discussion document.

But it went on to say: “Nationalisation is not a panacea for South Africa’s developmental challenges, but it should, in the manner we are proposing it, entail democratising the commanding heights of the economy, to ensure they are not just only legally owned by the state, but thoroughly democratised and controlled by the people.”

The document makes it clear, however, that Soviet-style nationalisation is not on the cards. Instead, it recommends that “nationalisation, like its opposite, privatisation, can assume various forms: it can be 100 per cent public ownership, or 51 per cent or more owned by the state, or established through partnership arrangements with the private sector in which the state assumes greater control”.

Ben Turok, a senior member of the ANC and one of the authors of the clause, does not share this interpretation. He and other ANC leaders, including Susan Shabangu, the minister in charge of mining, have argued that, in line with current legislation, mineral resources are already owned by the state on behalf of citizens.

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Shabangu has even said that nationalisation would not happen in her lifetime. In early November this year, she told a Deutsche Bank conference in London that “no matter how often our government states the obvious, that nationalisation is neither South African government policy, nor is it ANC policy, controversies and potential fears do not seem to disappear”. For his part, too, President Zuma has often tried to reassure foreign investors by reminding them that nationalisation is not ANC and government policy.

And, contrary to what may have been expected, the South African Communist Party (SACP) opposed the call for nationalisation at the ANC National General Council (NGC) in September 2010. It is not opposed on ideological grounds; its position is political – a product of suspicions that the Youth League is a Trojan horse for black mine owners whose assets are underperforming. According to the SACP, the call for nationalisation is nothing but a bail-out package in disguise.

Cosatu, meanwhile, supports the idea of nationalising key sectors of the economy – though this should not be confused with support for Malema and the Youth League.

As for Malema himself, the Financial Times’s Alec Russell commented in October 2011: “Such is the ANC’s rigid hierarchy, this 30-year-old wannabe (Malema) has no chance in the foreseeable future of leading the party.”

Importantly, at the 2010 NGC the Youth League spectacularly failed to convince ANC delegates to adopt a resolution calling for the nationalisation of mines. Instead, the ANC commissioned a group of independent researchers to look into the matter. They will present their findings and recommendations to delegates at the policy conference of the ruling party in May 2012.

It does not help the Youth League that key policy thinkers within the ANC are refusing to lend intellectual credibility to the Youth League’s nationalisation project. For instance, Joel Netshitenzhe, an ANC strategist and key policy thinker in Mbeki’s government, insists that what is important is the broader context in which the debate on nationalisation of the mines should be understood. “At the one level, it is about the profound issue of the approach to property relations in a national democratic society – the relationship between the state, the markets and the citizen,” he says. “It is about an understanding of the balance of forces and the difference between what is desirable and what is actually possible.”

The nationalisation of mines debate is, therefore, less about the desirability of such a policy measure and much

more about whether it is aligned to objective realities on the global and domestic fronts. In essence, the real debate over nationalisation concerns what should be the ongoing role of government in the development of industry and commerce in South Africa – and whether that role is likely to be a positive one, both for the country’s economic development and in ameliorating the social and economic conditions of the poor in order to reduce inequalities.

a costly impactAlthough Russell sees no threat to the ANC leadership in the short term from Malema, he goes on to say: “... the failure of President Jacob Zuma to rein him in as he (Malema) has called for the nationalisation of mines and banks has done South Africa’s reputation terrible harm... South Africa’s big platinum miners will stay, such is the country’s dominance

01 ANC Youth League president Julius Malema: the voice and face of nationalisation?

02 03 Any form of nationalisation of South Africa’s mining and banking sectors is likely to have a huge negative impact on the resources that can be allocated to other areas of pressing need

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of global platinum stocks. But the loss of other potential investments would be a disaster for the economy and for the very disenfranchised youth Mr Malema has fired up with his redistributive talk. Would the giant coal miners sell if they could? If the price was right, unquestionably.”

Economists Gavin Keeton and Greg White (in South Africa’s Business Day in September 2010) estimated that the market value of listed South African mines was about 850 billion rand (over $100 billion), a figure that, if borrowed, would take levels of public debt to almost 70 per cent of GDP. Over and above the extraordinary costs of acquisition is the problem the state would have in funding the 17 billion rand (c.$2 billion) deficit between the income and expenditure of the mining sector. The treasury would be worse off if it were the owner – and that does not take into account the impact of nationalisation on skills retention or operating efficiencies.

Moreover, the country’s constitution does not allow expropriation without compensation. According to South African investment management company Allan Gray, more than half the shares of several of the country’s largest mining companies are held by foreign investors.

If section 25 of the constitution were changed to remove the obligation to compensate local property owners, it would not remove the obligation to compensate foreign investors, which is enshrined in South Africa’s various bilateral treaties.The local shareholders are overwhelmingly pension funds, which manage the pensions of millions of South Africans, black and white, whose assets would decline accordingly.

Keeton and White make the point: “The price of nationalisation would be not just the capital outflows necessary to compensate the foreign owners of mining shares, but potentially even larger outflows, as other shareholders exit the rest of our stock market. Even if foreigners just stopped buying shares, investment levels must fall to our level of savings (15 per cent of GDP) and

01 Supporters of ANC Youth League president Julius Malema at the ANC’s head office in Johannesburg, September 2011, during the ongoing hearing about Malema bringing the ANC into disrepute

02 A credit department at Nedbank, one of South Africa’s four big banks. Malema has called for the nationalisation of both mines and banks

03 ANC deputy president Kgalema Motlanthe, who has called for free access to education and health and proposed establishing state mining companies

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“What the mining industry needs to appreciate is that, when it comes to the relationship between itself, society, and the state, we cannot proceed on the basis of business as usual.”aubrey matshiqi

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South Africa will be trapped in low GDP growth (perhaps two to three per cent a year) and soaring unemployment. With outflows, the effect will be even worse.

“One likely reason state-owned mining companies have historically performed poorly is that the government has not been able to provide capital when mines have needed it, for example during commodity-price downswings. The suggestion is that nationalisation would further damage South Africa’s already struggling major export industry.”

Planning (and former finance) minister Trevor Manuel is emphatic on this point, telling a 100 Top Companies audience in Johannesburg in late October this year: “South Africa has no fiscal resources to take over mines and the government should repeatedly say nationalisation is a seriously bad idea.” He went on to say: “The country desperately needs investment, especially in that we know we have our rich mineral reserves... The mining industry can play an important role in creating jobs in the economy, and obstacles to investment in the industry should be removed.”

confidence in a common visionOne of the reasons that the Youth League is failing to convince the ANC is that many view the nationalisation proposal as morally reprehensible, as it would force the ANC to favour demands for nationalisation (and resultant buying out of mining companies) over budget allocations for health, education, welfare and other needs of citizens.

Looking beyond the economic price to pay for nationalisation, it would be difficult to base the country’s developmental agenda on a common vision shared by business, civil society and the state. In short, there would be no buy-in from business, one of the key elements of the social pact that some have mooted as a solution to our problems of poverty and unemployment.

The problem with both sides in this debate is that each tends to preach to a converted constituency. What we have, as a result, are two echo chambers running parallel to one another. The Youth League must be careful not to impose policy choices that may cause more harm than good to the poor.

But what the mining industry needs to appreciate is that, when it comes to the tripartite relationship between society, the mining industry and the state, we can no longer proceed on the basis of business as usual.

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60 YEARS OF OPTIMA


“As the name Optima implies, we shall seek the highest and the best for the good of all.”

This is how Sir Ernest Oppenheimer concluded his foreword in the very first edition of Optima in 1951. Despite being written 60 years ago, Anglo American’s founder’s words still carry resonance and relevance to this day.

Of course, since then the business has changed greatly. From its roots in South Africa, Anglo American has expanded globally and has become one of the world’s great diversified mining companies. And it continues to provide substantial social and economic support to the communities neighbouring our operations.

For over half a century, some elements have remained constant. Optima was founded, in Sir Oppenheimer’s words, to “derive not only information… but a close understanding”. To invite “contributions from writers who are recognised as experts…and whose views command respect”. To “stimulate

ABOVE: The first edition of Optima contained eight articles from authors such as Paul Einzig, then political correspondent for the Financial Times, focusing on mining, industrial, scientific and

economic progress. In his foreword, Sir Ernest Oppenheimer wrote: “... as the name Optima implies, we shall seek through this journal to promote the highest and the best for the good of all.”

OPTIMA IS SIXTY

33NOVEMBER 2011 | Optima |

thought, and encourage a more reasoned consideration”.

To this day, Optima reports on everything from biodiversity, climate change and socio-economic issues to broader industry challenges beyond mining, with contributions from recognised experts such as former group chief executive of BP Lord Browne, one-time scientific adviser to the UK Sir David King, President of Liberia Ellen Johnson Sirleaf, and the head of the WPP advertising group Sir Martin Sorrell.

Those who have read Optima – it is distributed to around 20,000 opinion formers – have discovered articles and ideas that show the longstanding principles and beliefs at the heart of our founder’s views. In that respect, it’s very much the publication Sir Ernest envisaged. But it’s also one that continues to strive to be a benchmark for thought leadership in the mining industry, and for groundbreaking, informative and influential journalism.

ABOVE: After 60 years, Optima continues to uphold the values Sir Ernest Oppenheimer penned on the inside cover of the very first edition. The current issue features a look at the shift in power from west to east, a focus on climate change – both what Anglo American is doing and what the

world’s political leaders should do next – and a reflection on nationalisation in South Africa.

OPTIMA IS SIXTY

60 YEARS OF OPTIMA

First edition of Optima magazine

is published

1951

1954Anglo American founder Sir Ernest Oppenheimer

promises the company will make a “lasting contribution to the communities in which

we operate”

1951The Festival of Britain takes place in London, intended to promote

recovery and progress following World War II

1957Sir Ernest Oppenheimer

dies. His son, Harry Oppenheimer, succeeds him as chairman of both

De Beers and Anglo American

The Berlin Wall is erected

1961

1961Investment in Hudson Bay

Mining and Smelting Company in Canada signals

Anglo American’s first venture outside southern Africa

Anglo American Industrial Corporation is formed to hold the industrial assets

of the company

1963

US President John F Kennedy is

assassinated

1963

1964The first high-speed train line,

or Shinkansen, is opened, transporting passengers

between the Japanese capital Tokyo and Osaka at speeds

reaching 210 kph

Death of Russian leader Joseph Stalin

1953

Russia launches a dog named Laika into

outer space

1957

60s

1951: DAggAfOnTeIn MIneS By the 1950s, Daggafontein Mines in South Africa had become one of the most lucrative sites for gold production on the Rand, in terms of both tonnage milled and profit. But the mines had not always been the source of good news. In 1914, funding shortages and high working costs resulted in the suspension of all operations, and throughout the following decade development was marred by bouts of flooding and labour difficulties. It was not until 1932 that the mine made its first working profit, a total of £176,116.

1951: A DIAMOnD IS fOReVeRThe De Beers advertising campaign featuring the phrase “A Diamond is Forever” was created in 1948 by copywriter Frances Gerety, who has long since passed into advertising folklore. It is now considered one of the most successful slogans of the 20th century. The poem featured in this

De Beers advert from 60 years ago reads: “Timeless as a river, your engagement diamond pours forth all your years together. In its stream of beauty, it marks the moments your hearts hold dear, and thus becomes more lovely on the way.”

1961: The COngO’S ChAllengeAfter the Congo declared independence from

Belgium, British journalist Tom Hopkinson visited the troubled country to report on the

situation for Optima. He noted a sense of tension everywhere other than in the capital,

Leopoldville (now Kinshasa). The half-century that followed independence has been marred

by widespread conflict in the Democratic Republic of Congo, the location of some of the

world’s greatest mineral resources.

1967: RICh DeSeRTS Despite the inhospitable conditions of the Sahara desert, rich natural resources discovered in places such as Mauritania proved a prospect too tempting for Anglo American to overlook. The hill in this picture contains a copper deposit at Akjoujt, a mining town 250 kilometres north-east of the capital Nouakchott.

1967: In ReTROSPeCTThis Optima photo spread from 1967 takes

a look at some of the precursors to the foundation of Anglo American. Clockwise from

left; a traction engine at Northern Copper Company property in Northern Rhodesia (now Zambia); a British South Africa Company mail coach in Salisbury (now Harare) in 1912; one of the company’s consulting geologists inspecting

a river near to what would become the Nchanga copper mine, and a steam shovel at

Bwana Mkubwa in 1922 after the copper mine had been closed for four years.

A delegation led by Gavin Relly meets the banned

African National Congress (ANC) in Lusaka, Zambia

1985

1982Harry Oppenheimer retires as chairman of Anglo American,

succeeded by Gavin Relly the following year

Timber, pulp and paper are the next venture for

Anglo American with the founding of Mondi Group

1967

Neil Armstrong walks on the

moon

1969

The Anglo American Chairman’s Fund is

founded to encourage corporate social investment

1974

Microsoft isfounded

1975

Amcoal establishes the Pollution Control Trust,

focused on the rehabilitation of coalfields in South Africa

1977

Anglo American begins operations in Chile with Empresa

Minera Mantos Blancos

1980

1979 Margaret Thatcher

becomes the UK’s first female prime minister

1975Amcoal (later Anglo Coal) is

formed through the consolidation of

eight South African coalmines

1974Richard Nixon

resigns as President of the United States following the

Watergate scandal

1973The opening of the Anglo American do

Brasil (Ambras) office in Rio de Janeiro

1969The government of

Botswana and De Beers agree the lease of the

Orapa line, creating the De Beers Botswana Mining

Company (Debswana)

70s 80s

1970: JeWel In The CROWn With its interest in De Beers, a renaissance

in jewellery design was a natural topic to feature in the pages of Optima.

This article was one of a series written by Graham Hughes, art director of Goldsmiths’

Hall in London, who attributed Milan’s post-World War II artistic revival to the

abandonment of its fascist ideas of greatness. Today the city revels in a reputation Hughes described as “one of the most fertile sources of modern fashion and design in the world”.

1975: TROUBleD SOUTh-eAST ASIA In the 30 years that followed the Second World War, South-east Asia was wracked by conflict. The region first played host to a showdown between dwindling European colonial powers and local militant nationalism, followed by the US’ military intervention to halt the spread of communism. This study in a 1975 edition of Optima suggested a tentatively positive outlook for the group of nations, which in hindsight proved to be an accurate prediction.

1979: InDIVIDUAl ThInKIngAt a time when Britain was gripped by the

trade union strikes in a spell that became known as the ‘winter of discontent’,

distinguished author and historian Paul Johnson wrote this piece in Optima

putting forward his libertarian view that the spending power of individuals is directly related to their freedom, meaning higher

taxes are a form of enslavement.

1979: InDIAnS Of SOUTh AfRICAThe plight of South Africa’s minority

Indian population was something often overlooked in history, despite the estimated 778,000 people of Asian descent living in the country at the time of this article in Optima.

It spoke out against the policies of ethnic discrimination, which began in the early 20th century and led to segregation and

widespread resettlement.

1986An explosion and fire at the Chernobyl nuclear

power plant in the Ukraine releases widespread

radioactive contamination

1975: APARTheID STRUggleOver the years Optima has proved it is willing

to speak out against political and social injustice. This study into the lives of

2.5 million mixed-race people in South Africa during apartheid shed light on what the rest of the world saw as a predominantly black

and white issue.

1989Fall of the Berlin Wall

A ban on the ANC is lifted. Nelson Mandela is freed after 27 years

in prison

1990

1990Julian Ogilvie

Thompson succeeds Gavin Relly as chairman of

Anglo American

Dissolution of the USSR creates independence

for all 15 former Soviet republics

1991

1992Venetia diamond mine is

opened and will become the largest producer of diamonds

in South Africa

1999Anglo American combines with Minorco SA to form Anglo American plc. The

company enters the FTSE 100 index, positioned 26th

Launch of Anglo American’s Employee Shareholder Scheme

gives 133,000 employees a stake in the company

1988

Nelson Mandela is appointed President

of South Africa

1994

De Beers’ “A diamond is forever” is voted best slogan of the century by US trade magazine Advertising Age

1999

The coal assets of Shell Australia are acquired by Anglo American

2000

2000India marks

the birth of its billionth citizen

2000Tony Trahar

becomes chief executive of

Anglo American

90s 00s

1980: MIgRAnT WORKfORCe During apartheid, Optima commissioned this study of South

Africa’s migrant workforce, which challenged the outlook of the regime. The author, Merle Lipton, writes: “It is surely perverse to

deny, as many observers do, that the severe restrictions on land ownership (and even tenancy), the special taxes, and discriminatory

government treatment of black farmers, were major causes of the conversion of black peasants into migrant labourers.”

1992: SleePIng gIAnTSFor a number of years Anglo American was eager to overcome the damaging impact apartheid continued to have on the South

African economy. This article in Optima argued the post-apartheid South Africa needed to heed the lessons learned from post-colonial India, where the ruling Congress Party had failed to raise the living

standards of the population.

1999: neW MeRgeR, neW eRAThe merger between Anglo American Corporation of South Africa

and Europe-based Minorco placed Anglo American plc in the FTSE 100 Index’s top 30 companies and marked the beginning of a new era for the company. Then chairman and chief executive Julian Ogilvie Thompson said the watershed moment was the culmination of “over two years of deep strategic thinking and more than a year of extremely hard work, involving more than 30 major transactions”.

1983: A SPACe ODYSSeYThough you might not think about them on a day-to-day basis, satellites are an integral part of our everyday lives. Smartphone

geo-tagging, 3G and SatNav are examples of technology that now seems light years ahead of the primitive predecessors discussed in this

issue of Optima from 1983. But it was at this time scientists began to unlock the commercial potential of these orbiting masterpieces, which

had previously been built with military use in mind.

2007: eneRgY SUPPlYPerhaps the only significant change

to the outlook of world leaders on the environment since this article

appeared in Optima, is that they seem to acknowledge it’s an undeniable problem. The International Energy Agency states

“unprecedented co-operation” is needed between governments and industry. But

with the international political community still struggling to reach a strategic agreement, this remains doubtful.

2001: CORRUPTIOnCorruption remains as significant an issue

today as it was 10 years ago, with allegations emanating from phone hacking to match fixing, reaching even organisations such as the International Cricket Board. This

feature in Optima highlighted that in 2001, the only African nations to make the Corruption Perceptions Index top 50 least

corrupt countries were Botswana, Tunisia and South Africa. At the time, an

estimated $148 billion - 25 per cent of Africa’s GDP - was being lost to corruption.

Sir Mark Moody- Stuart becomes

the fifth chairman of Anglo American

2002

2002Anglo American acquires Exxon’s

Disputada copper assets in Chile

2001In New York, aerial attacks bring down

the World Trade Center’s Twin Towers

2006Twitter is launched

Cynthia Carroll becomes chief

executive of Anglo American

2007

The Anglo American Group Foundation is launched to support a wide range of charities

2005

After 69 days trapped underground, all 33 Chilean miners are

released

2010

Barack Obama becomes US

President

2009

2011Anglo American

announces it is to buy the Oppenheimer family’s

shareholding in De Beers

The FTSE4Good Index, recognising commitment to sustainability, includes

Anglo American

2011

2010Anglo American is the first mining company to receive

the Community Mark award, recognising responsible

business practice

2008Anglo American

acquires 100 per cent of Minas-Rio in Brazil

2010: The qUIeT AUSTRAlIAn Despite being Australia’s fourth biggest coal miner and

its second biggest producer of metallurgical coal, Optima reported on how Anglo American remains a relatively

“quiet Australian”, little known to many outside the industry.

2009: InVeSTMenT In MInAS-RIO When Anglo American attained its primary listing in the

FTSE 100 in 1999, the company specified iron ore as a key area of growth for the business. A decade later, this

feature in Optima celebrated the ambitious scale of Anglo American’s Minas-Rio project, one of the biggest

iron ore projects in the world.

2007: eneRgY SUPPlYPerhaps the only significant change

to the outlook of world leaders on the environment since this article

appeared in Optima, is that they seem to acknowledge it’s an undeniable problem. The International Energy Agency states

“unprecedented co-operation” is needed between governments and industry. But

with the international political community still struggling to reach a strategic agreement, this remains doubtful.

2001: CORRUPTIOnCorruption remains as significant an issue

today as it was 10 years ago, with allegations emanating from phone hacking to match fixing, reaching even organisations such as the International Cricket Board. This

feature in Optima highlighted that in 2001, the only African nations to make the Corruption Perceptions Index top 50 least

corrupt countries were Botswana, Tunisia and South Africa. At the time, an

estimated $148 billion - 25 per cent of Africa’s GDP - was being lost to corruption.

2004: TRUTh AnD ReCOnCIlIATIOn Archbishop Desmond Tutu was a key member of South Africa’s Truth and Reconciliation Commission. A decade after the political enfranchisement of millions of black South Africans, he wrote in Optima: “The world’s verdict is that we did a superb job. We were given a great privilege – that, wounded ourselves, we could contribute to the healing of a wounded and traumatised people… We have become a beacon of hope to the rest of the world.”

2009Sir John Parker

becomes the sixth chairman of

Anglo American

technology profile


imagine a mine site where risk to human safety is zero, waste is negligible and carbon emissions barely register. The image carries more than a whiff of impossibility in 2011, but it could become reality in the not-too-distant future. For Anglo American, developing new and innovative methods of mining is vital not only for improving its safety procedures and green credentials, but

also for ensuring its place as a market leader for years to come. As author Stewart Brand once said: “Once a new technology rolls over you, if you’re not part of the steamroller, you’re part of the road”.

The company has embarked upon a journey to become a mining giant that is safer, greener, cleaner, more automated and more efficient, using intelligent machines to transform the industry.

The in-house technology development group is overseeing the evolution. It has formulated a vision for a futuristic mine

mine of informationIntelligent use of innovation, research and data will make the industry safer and more efficient in the future. tom Washington looks at how Anglo American is progressing towards a technology-driven mine.

around 20 years from now, drafting the related roadmaps and technology development action plans.

Dave Bentley, who heads up the South Africa-based technology development team, says the successful application of the technologies being developed for mines in the 2030s should provide Anglo American with a considerable competitive advantage in the mining sector.

“New technologies can help us to transform the value mining brings to our world. For me and Anglo American, technology is not an end in itself. It’s a means to answer some of the big questions facing the industry.

“The vision of future technology has been derived by projecting ourselves 20 years into the future, looking at the pressures on mining at that time, from mining at greater depths and lower grades to the demands for water, energy and carbon efficiency,” he says.

The project has been translated into 11 programmes covering Anglo American’s entire value chain and all associated activities, from rapid discovery, logistics and safety to mining methods, automation and alternative processes. Within these are some 50 defined projects, already under way, that Anglo American believes will transform the way it does business.

going greenOne of the 11 programmes focuses on the reduction of carbon dioxide (CO2 ) emissions. A key challenge faced in mining is that more demanding conditions such as lower ore grades at deeper levels are making mining more energy-intensive.

“We have internal targets to reduce carbon emissions but, apart from the proposed carbon tax in Australia, there is no legal pressure to,” says Bentley. “We want to be ahead of the game.”

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Carbon capture and storage technologies (CCS), along with biological-sequestration, are promising options for large-scale reductions in CO2 emissions from energy use. CCS involves the injection of CO2 into stable geological structures for long-term storage, preventing its release into the atmosphere, while bio-sequestration depends on natural processes such as the absorption of carbon by plants in the process of photosynthesis.

Anglo American participates in a number of initiatives in both methods, including the Otway storage project in south-western Victoria, Australia, home to the world’s largest CCS demonstration project. More than 65,000 tonnes of CO2 have been injected and stored in a depleted gas reservoir deep underground and further injections into different formations are planned.

Elsewhere in Australia, Anglo American is involved in the Callide Oxyfuel Project in Queensland – next to its Callide coal mine – which is expected to be a world-first

demonstration of how existing coal-fired power stations can be adapted to produce almost zero-emission electricity.

Anglo American is also a cornerstone investor – with a 20 per cent shareholding – in Australian firm MBD Energy, which has developed a process for capturing carbon using algae, a potentially viable alternative to CCS schemes. The algae can subsequently be harvested to produce a biofuel, which can be converted to diesel or other liquid carbons, and cattle feed. MBD Energy is in the process of constructing a demonstration plant at a power station in Australia, and Bentley suggests there is potential for the algae carbon storage process to be used at a South Africa-based power plant.

“We’re not going to be owners of the technology,” explains Bentley, “but if we don’t invest in companies like MBD Energy, the technologies won’t develop because they don’t have the funding to start planning for the longer-term future of mining.”

Indeed, partly owing to the large investments required by manufacturers, technology in the sector has not advanced as rapidly as the processing space. “Mining companies and the manufacturers need to work together for better solutions,” insists Bentley. “An equipment manufacturer will not commit large sums of money to radically transform mining methods unless it knows that there is a mining company willing to work with it towards a common goal.”

“the vision has been derived by projecting ourselves 20 years into the future, looking at the pressures at that time... from mining at greater depths to demands for carbon efficiency.”Dave bentley

01 Anglo American’s Platinum business has developed refining technology so that it can produce 99.99 per cent pure platinum. Here, a worker at its refinery in Rustenburg is cooling a platinum ingot that has just been removed from the furnace

02 The Los Bronces expansion project in the Chilean Andes entailed an investment of $1.7 billion to build new state-of-the art grinding facilities and a flotation plant

03 Anglo American Research houses the world’s largest laboratory for automated mineralogical analysis, providing the company with world-class solutions and expertise

02 03

technology profile


technological progressThe technology development team has progressed in other areas. In exploration, Anglo American’s state-of-the-art airborne electromagnetic system, Spectrem, has proved extremely effective, demonstrating how technology will benefit mining in the future.

Spectrem is characterised by a 100 per cent duty cycle transmitter, which means deeper penetration and the ability to operate in areas of conductive cover. A large powerful flying platform allows the machine to operate in rugged

0201

terrain and, notably, with greater safety margins. Last year, Spectrem screened more than 8,500 square kilometres in a remote area over a period of just four months, identifying more than 10 targets, and permitting areas of low prospectivity to be relinquished.

Other technologies will take longer to develop, for example to eliminate the need for explosives. While efficient for breaking rock, blasting creates unwanted side-effects: damage to surrounding rocks, which causes safety concerns, ore dilution or loss and periods of inactivity when a mine is vacated for a blast.

An alternative method is rock-cutting techniques, currently used for tunnel boring, continuous coal mining and iron ore mining in Australia. In 2009, Anglo American’s Los Bronces copper operation in Chile adopted tunnel-boring technology to overcome challenging weather conditions and tough terrain, and is experiencing great success. A mechanised boring machine is advancing at a rate of up to 600 metres per month – compared to less than 50 metres a month using conventional methods.

“Extending this technology to hard-rock cutting underground and in open pits will significantly improve safety and efficiency and allow for better control of the mining process,” explains Bentley. “The techniques still need to be developed, but we foresee intelligent machines

investing in the futureAnglo American has invested more than $1 million to fund a world-first mine design laboratory at the University of Witwatersrand in South Africa, established to create “the next generation of mining engineers”.

The investment has resulted in the construction of a world-class laboratory that is equipped with the latest technology, including 100 networked PCs and floor-to-ceiling projector screens, which can accommodate as many as 200 students at a time.

more info

For more information, visit www.wits.ac.za/academic/ebe/miningeng > Facilities

01 Inspection of the tunnel boring machine (TBM) at the Los Sulfatos copper deposits in the Chilean Andes. TBMs, which are rarely used in mining, are being employed by Anglo American’s exploration team to create an eight-kilometre tunnel

02 Anglo American’s Thabazimbi iron ore mine in South Africa, where radar technology is used in pit wall monitoring – a vital aspect in ensuring operational safety


1 Water sourced from streams or old drill holes is used to cool the drill bit and act as a lubricant, while also carrying the cuttings (ground-up rock) back to the surface.

2 As the drill turns, the re-circulation of water allows for a steadier and more secure set-up to be created, decreasing the chance of the drill sinking or tipping, and thereby reducing the likelihood of having to re-drill a target.

5 EXITING THE TANK A plastic bag tube is attached to a pipe located on the tank’s base. The valve on the pipe is opened and the sediment slush flows into the plastic bag tube.

6 These ‘sausages’ can then be disposed of appropriately, with the now clean water being pumped back to the rig’s water tank to be re-used in the drilling cycle – thereby decreasing the overall amount of water needed for the drill process, and significantly reducing the environmental footprint.

pump Coil heaterWatertank baffled tanks

and filters

drill rig

Water plus cuttings

Water (no cuttings)

solids contained with plastic cover

sausage

rock cuttings are taken to approved

waste facility

Water fromold drill hole

Water anddrill cuttings

drill bit

Water

Collector

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2

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Case stuDy: teChnologiCal innovation in arCtiC finlanDExploration in Arctic Finland presents many logistical challenges. Most work is carried out in the winter – with temperatures often below --20°C – when the ground has sufficient snow cover and is frozen enough to support the weight of the drill rigs.

Located in an environmentally sensitive region, the Sakatti exploration project faced challenges that required an innovative solution to further reduce its environmental and drilling footprint.

In Finland, Anglo American’s exploration team, working in

collaboration with drill contractors, Kati, was able to come up with a solution. A closed system drilling technique was developed by taking an idea from a Canadian operation and adapting it to the specific conditions in Finland.

3 ENTERING THE TANK When the water returns to the surface it is collected as it flows over the edge of the overburden casing and pumped into a set of rectangular containers called baffled tanks. Cuttings concentrate at the base of the tank via a gravity settling process.

4 INSIDE THE TANK As the cuttings are fed into the tank, pieces combine together to create what are called floccules. As the floccules are heavier than water, they sink to the bottom of the tank to create a layer of thick sediment slush.

figure 1:SCHEMATIC PROCESS FLOW PATH OFCLOSED SySTEM DRILLING

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technology profile


cutting the rock face into small chips that are transported away by conveyor. This applies not only to the mining of ore, but also to mine development and shaft sinking. In general, the rate of advance with rock-cutting techniques should be higher than with drill and blast techniques.”

adding value through automationAutomation will play a key part in how mines operate in the future, cutting down scope for human error, especially on routine mining tasks, such as driving out of the pit to dump material or drilling a rock face.

“We could provide ‘operator assist’ in a truck to allow it to drive itself on the long winding road out of the pit, and help to combat driver fatigue, efficiency and safety,” considers Bentley. “Or we could have the truck driven remotely from an office, or have a computer drive it.”

Plant processing can already be controlled remotely, from control rooms on site with no visibility of the process except through computer screens. But Bentley says there is no reason why this cannot be done from a nearby city.

“In our Platinum business, we already have a central process control room in Johannesburg where process-control experts advise the individual plants on improvements in control algorithms,” Bentley explains. “Our key experts are able to add value to numerous mines by having a central room with visibility, via computer, of numerous sites. The experts can see problems developing and propose corrections before the issues become critical.”

legacy of innovationAnglo American has long been at the forefront of technological innovation. Going back as far as 1936, research into industrial uses for low-grade diamonds in cutting and abrasive tools led to an entirely new branch of synthetic diamond manufacturing, which changed engineering and drilling globally.

In 1992, Anglo American developed and patented a unique direct current (DC) arc-smelting process to recover mineral sands at the Namakwa Sands project in South Africa. The DC-arc ilmenite-smelting technology

“our technology group is firmly committed to making our vision a reality, and so radically helping to change the mining industry.”Dave bentley

A great example of driving innovation

through business strategy is our technology development programme for treating nickel laterites.

We initiated the programme following a review of the global nickel supply and demand picture, which showed that, at the time, there really wasn’t a technology that could win nickel from laterites with a compelling promise of profitability. Yet laterites make up around 70 per cent of global nickel resources.

The brief to the researchers was simple: find a way to produce nickel at a low operating cost, and in an environmentally friendly way.

Instead of allowing emotions, opinions and prejudices to steer the design of the technology package, we settled our disputes on the basis of projected costs. For example, we couldn’t have a process step that cost 20c/lb, unless we managed to find a way to save 20c/lb somewhere else in the circuit design.

insiDe vieW jan smit›› head of technology, technical solutions, anglo american

For nickel to dissolve, one requires acid, which leads salts to dissolve, which, in turn, depends on the removal of the salts. This requires water to be discharged, which needs fresh water... the list goes

on. So the research team was driven to limit the cost of these cascade effects in the process.

The team needed to break this cycle, so we designed a process that works in a closed loop, from which dissolved salts are removed by precipitation. This encourages us to think of chemicals as things that can be regenerated and re-used, rather than things that are used up and then discarded.

The process is now being piloted for the second time, after a very successful campaign earlier this year. The researchers have been sent back to the bench – with the brief to beat their own technology economically, and to find a way to produce an iron ore by-product. With the knowledge gained so far, we are confident we can do this.”

01


was developed and tested to pilot scale, in conjunction with Mintek, South Africa’s mining and technology research organisation, over the following two years. The first furnace – a 25 megawatt DC furnace – was commissioned in June 1995.

The innovative Namakwa operation saw the direct use of fine run-of-mine material, eliminating the need for the investment-intensive process of combining fine particles into durable clusters upstream of the furnace, while the lower price levels for fine material saw overall operating costs fall.

global reachMost global business units carry out their own technology development specific to work in their core region. Bentley’s team is working with Anglo American’s Nickel business in Brazil, for example, to develop a new processing technology (ARNi) to treat nickel laterite deposits. At Jacaré in Pará state in the north of the country, Anglo American holds the mineral rights to a world-class nickel laterite deposit.

Process manager Vicente Fortes explains: “The exploration already carried out indicates two types of ore that require two different metallurgical process routes. Our Nickel business unit holds the technology for the pyrometallurgical route, while the hydrometallurgical route for part of the Jacaré ore is being developed by Anglo American’s Technical Solutions unit, making use of integrated pilot plant installed in Johannesburg.”

“This pilot plant is now starting the second testing campaign and the results so far have been very encouraging.”

01 The Anglo American Research Nickel (ARNi) test plant is developing a new hydrometallurgical process with Anglo American’s Nickel business in Brazil, giving the company a strong competitive advantage

Tom Washington is a journalist with experience on publications in the UK and Australia. He currently works for a London publishing agency on a range of corporate titles.

authortom Washington

Bentley calls the innovation “unique” and “impressive”. “It can simultaneously process both portions of a nickel laterite – the limonite and saprolite. Existing processes can treat only one portion, leaving the other one as waste.”

Anglo American hopes to have tested and also commercialised the process by 2013.

Bentley says a leader in its field in terms of technology development has been Anglo American’s Platinum business. “It has led the industry in process development, and continues to do so with the introduction of fine grinding and ongoing work on mineralogy and refining. The reality is that we are the dominant player in the platinum market, and so the onus really falls on us to lead the industry.”

However, while the mining industry continues to grow in so many ways – with bigger machinery, explosives, and budgets – this has not necessarily equated to radical improvements. There has tended to be a lack of leadership, specifically in mining technology, as opposed to process technology, in the mining industry.

What will transform it over the next two decades are big ideas. “At the moment we’ve still got big trucks and explosives, the same as we did 20 years go,” concludes Bentley. “Suppliers of technology can’t make radical changes until a big company approaches them and says, ‘we want to operate a mine without trucks, or we want to get our material to port with driverless trains’.

“At Anglo American we believe we are that sort of company and our technology development group is firmly committed to making our vision a reality, and so radically helping to change the mining industry.”

global Collaboration bears fruitAnglo American’s Technical Solutions unit in South Africa and its Metallurgical Coal’s Dawson mine team in Australia have developed a system that automatically senses the health of trucks and provides early warnings of failures, so they can be prevented before they happen.

Working across time zones and collaborating by e-mail and teleconference, the teams partnered closely for a year to turn the idea into reality.

Thanks to the new system, which was a project of Anglo American’s Technology group, Dawson mine has

improved the availability of its 797B fleet of trucks from around 70 per cent to more than 85 per cent in 12 months. The extra value this has generated equates to nearly US$22 million.

The system is currently being trialled in a range of operations, including Capcoal and Foxleigh in Australia and El Soldado in Chile, with mines in South Africa to follow shortly.

Mohammed Amade, a Technical Solutions mechanical engineer, reflects: “It goes to show that no matter where we are in the world, we can come together to make innovation happen, and make our visions a reality.”

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Minor metals with major impacts. alison cowley offers a rough guide to platinum’s little-known

sister metals – ruthenium, iridium and osmium – and how they help shape our modern lifestyles

and maintain our health.

t’s easy to forget that there are six platinum group metals (PGMs). Take a straw poll of people outside the metals industry, and most of your

survey group will have heard of just one – platinum.

Those with an interest in cars may be familiar with palladium. If you strike it lucky, you might come across someone who is aware of the vital role that rhodium plays in keeping our air clean. Mention the other three – ruthenium, iridium and osmium – and you are almost guaranteed a series of blank looks.

Yet ruthenium and iridium are critical to our modern lifestyles, playing vital roles in sectors as diverse as data storage, flat screens, medical implants and diagnostic equipment, automotive components, renewable energy, and bulk chemicals. Their less versatile sibling, osmium, plays a smaller role in modern technology, although the compound osmium tetroxide is widely used to stain biological samples.

a short historyPlatinum has been known for many centuries. There is archaeological evidence to show it was worked by pre-Columbian Americans in South America, using powder metallurgy techniques. However, the other PGMs were only identified about 200 years ago. Iridium and osmium were discovered and named in 1803 by the British chemist Smithson Tennant. He named iridium after Iris, the Greek goddess of the rainbow, because of the

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01 An alloy of 10 per cent iridium and 90 per cent platinum is used in medical devices such as pacemakers

02 A visitor tests Smart 3D TV at the Samsung Electronics headquarters in Seoul, South Korea. A boom in the flat-screen TV industry has helped increase iridium’s market price

03 Ruthenium has helped revolutionise the storage capacity of hard drives

“ruthenia” is the Latin word for “Rus”, which denotes an area of eastern Europe covering parts of Ukraine, Russia, Belarus, Poland and Slovakia.

remarKable propertiesThe relatively late discovery of these other PGMs was partly due to the difficulty of separating them from naturally occurring alloys of platinum – all three are insoluble, even in aqua regia, a mixture of hydrochloric acid and nitric acid in which platinum and palladium can be dissolved.

They also have other remarkable properties: osmium and iridium are, respectively, the densest and the second-densest elements; iridium is the most corrosion-resistant – while all three have unusually high melting points well in excess of 2,000oC. In the case of iridium, this high melting point is of critical importance in its largest single application, the use of iridium crucibles for growing crystals.

Iridium and ruthenium have an array of industrial uses, many of which have a huge impact on our modern lives.

pixie dustTake the PC that you work on. Ten years ago, its drive most likely stored no more than 10 gigabytes of data. Today, it will likely hold one terabyte – a one hundredfold increase in capacity in a single decade. Ruthenium can claim much of the credit for that increase.

In 2001, IBM introduced a new data-storage technology known formally as anti-ferromagnetically coupled (AFC) media or, more colloquially, as ‘pixie dust’. The magic ingredient? Thin layers of ruthenium, used as the filling in a ‘sandwich’ of magnetic media coated on the disk surface. This enabled manufacturers to reduce the size of the individual magnetic domains, each of which stores a single bit of data, and it led to dramatic improvements in areal density (the volume of data that can be stored on a given surface area of disk).

Five years later, ruthenium was at the core of a second revolution in hard-disk technology. Before 2006, most hard drives used “longitudinal magnetic recording”, in which the

strikingly coloured chemical salts that he obtained during his experiments. Two centuries later, iridium continues to live up to its name: the flat-screen-display industry eagerly exploits iridium complexes in organic light emitting diodes, which emit red, green and blue light.

Osmium received its name from a rather less attractive facet of its chemistry – the pungent odour of some of its salts (the Greek word “osme” means “smell”).

The identification of ruthenium had to wait another 40 years, until 1844. Its discovery is usually credited to the Russian chemist Karl Karlovich Klaus, who named it after his homeland;

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“ruthenium and iridium are critical to our modern lifestyles, playing roles in sectors as diverse as medicine and renewable energy. osmium plays a smaller role in technology.”

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While providing some important benefits in industrial applications, the properties of platinum group metals (PGMs) also contribute to the difficulty, timescale and cost of refining.

The refinery processes employed vary, but typically they involve proprietary distillation and solvent extraction. The time that elapses between mining of the platinum ore and production of refined iridium and ruthenium metal is usually at least two months, but often much longer.

In the case of osmium, the cost of refining the metal and the lack of industrial demand may render its production uneconomic in some circumstances. Most of the osmium contained in South African ores is not fully refined, but it is removed from refinery circuits as an intermediate and retained for future use.

Iridium and ruthenium are rare and occur in low concentrations, so despite their value (at the time of writing, in October 2011, ruthenium was trading at $130 per troy ounce and iridium $1,085), they are produced only as by-products of mining platinum and nickel. Most of the world’s supply of ruthenium and iridium comes from South Africa, where the Bushveld platinum ores – and in particular, the chromitite layer known as UG2 – contain small but commercially important quantities of these metals. Over 90 per cent of world primary production of iridium comes from the Bushveld, and for ruthenium the figure is higher: more than 95 per cent.

Supply of these metals is therefore closely tied to South African platinum output, and Anglo American, as the world’s leading platinum producer, is the single largest contributor to global ruthenium and iridium production.

pgms in mining

PGMs are separated at Anglo American’s Platinum business’ precious metals refinery. The supply of iridium, ruthenium and osmium is closely tied to platinum production in South Africa

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magnetisation of each data-storing domain was parallel to the disk surface. By increasing the thickness of the ruthenium layers, manufacturers were able to develop disks using “perpendicular magnetic recording”, or PMR, in which magnetisation is perpendicular to the disk surface and the size of each magnetic domain can be reduced accordingly. This has enabled dramatic increases in storage capacity. Prior to the introduction of PMR, top-of-the-range disk drives could store up to 500 gigabytes of data; with PMR, the figure is now three terabytes and rising.

In the early days of PMR, hard-disk companies bought large amounts of ruthenium, driving global metal demand above the level that could be met consistently from primary supplies, and the price to a high of $870 in early 2007. Streamlining of the process has enabled manufacturers to reduce their ruthenium consumption to more sustainable levels, although hard disks remain the single largest application for ruthenium, consuming 440,000 ounces in 2010 (around 45 per cent of total demand).

sapphire crystalsYour computing experience also involves iridium, although in a less direct way. The backlighting for many liquid crystal displays comes from light-emitting diodes (LEDs), which use inorganic semi-conductor materials as their light source.

The use of LEDs in display applications has two major benefits: they are more energy-efficient, reducing electricity consumption by as much as 40 per cent; and they have better performance characteristics, including improved brightness and contrast, and a wider palette of colours. As a result, LED backlighting has been

widely adopted for smaller displays such as smartphones, tablet computers and laptops and, since 2009, there has also been a rapid technology shift in the flat-screen-television industry. This year, market penetration for LED backlit TVs is forecast to double.

Iridium’s role is in the manufacture of sapphire crystals, used as a substrate for growing gallium nitride, the semi-conductor that generates blue and green light. Sapphire is frequently produced using the Czochralski method, in which a single crystal is ‘pulled’ from a pool of molten salts contained in an iridium crucible. Iridium is used for its extremely high melting point (crystal growth requires temperatures of over 2,000oC) and resistance to chemical attack. More than 200,000 tonnes of South African platinum ore must be processed to supply the iridium by-product needed for a typical iridium crucible set with a diameter of 10 inches (25 centimetres) and weighing around 700 ounces (almost 20 kilograms).

Iridium crucibles can be used for other crystal-growing applications, such as lithium-based crystals for surface acoustic wave filters. These improve the performance of mobile phones, satellite receivers and other wireless communications equipment, and rare-earth “scintillator” crystals used in medical and security-screening scanners, such as positron emission tomography scanners, increasingly used to diagnose tumours, contain crystals grown in iridium crucibles.

rapid groWthThe rapid growth in the LED sector has had a dramatic impact on the iridium market. Last year, global demand more than trebled to 340,000 ounces, as sapphire manufacturers expanded their crystal production lines, driving the


01 In healthcare, ruthenium salts are used to analyse micro-organisms in blood. They can detect when there is a high concentration of oxygen in the blood

02 Uses for osmium vary from chemical salts to pen nibs

03 Molten salts contained in iridium crucibles are used to produce single crystals of sapphires, which, in turn, are used as the substrates to create LEDs for backlit TVs and mobile phones

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MIKE KEMP / RUBBERBALL / CORBISIMAGE SOURCE / CORBIS

iridium price during 2010 and early 2011 to over $1,000 from a previously stable figure of around $400 per troy ounce.

Although iridium usage in crucibles is expected to moderate once sufficient crystal-pulling capacity is in place, the future for iridium in the solid-state lighting sector remains bright. A cutting-edge lighting technology, known as the organic light-emitting diode (OLED), uses specialised iridium complexes that act as phosphorescent light emitters in the presence of an electrical current. OLEDs have many advantages compared with older display technology: better resolution, sharper colours, faster response and refresh times, and reduced energy consumption. Demand for iridium for this application is small at present, but is growing very rapidly.

many usesHard disks and backlit screens play the starring roles, but many industrial and consumer markets depend on ruthenium and iridium. For example, both metals are used in electrodes for the production of chlorine, and in catalysts for the manufacture of acetic acid. Ruthenium-containing resistors are widely used in electronic devices, while iridium-containing alloys are found in medical devices such as pacemakers and catheters, and in spark plugs for cars.

Perhaps most importantly, iridium and ruthenium – like platinum – play key roles in energy efficiency and renewables. For example, ruthenium is used alongside platinum in some fuel cells, and is also used in dye-sensitised photovoltaic (solar) cells. LEDs produced using iridium are already improving the energy efficiency of TVs and computer screens – but they also have the potential to deliver radical

reductions in energy consumption in domestic and industrial lighting.

These little-known metals touch our lives in numerous ways. Smithson Tennant and Karl Karlovich Klaus would marvel at the modern-day usage of their discoveries. Our lifestyles

now depend on laptops, smartphones and backlit LED televisions that were unheard of 30, 20 or even just 10 years ago. Who knows what the future holds? Innovation may, indeed, lift the lesser-known half of the PGMs into a league of their own.

Alison Cowley has worked for speciality chemicals company Johnson Matthey plc for over 20 years. In her current role as principal analyst, she is responsible for forecasting supplies of platinum group metals, as well as demand for these metals in industrial applications, including biomedical and aerospace.

authoralison CoWley

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Carlos Alberto Júlio is a business leader and lecturer for the Faculty of Economics, Business Administration and Accounting at the University of São Paulo. He is the author of five books on business, Reinventing Yourself; The Magic of the Great Negotiators; The Art of Strategy; Supertips to Sell and Negotiate Well; and, most recently, The Cedars Economy. He holds an MBA from Penn State University, and has studied marketing at Harvard Business School and the International Institute for Management Development in Lausanne, Switzerland. He is currently vice-chairman of the board of Tecnisa SA, one of Brazil’s largest civil construction companies.

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Translation of the words “Ordem E Progresso” on Brazil’s national flag

y his own admission, he is neither an economist, nor a businessman. Carlos Alberto Júlio might claim to be something of a business chameleon, having taken on multiple professional roles – simultaneously. His career history records 30 years as a professor, 26 as a corporate

president and 20 as a trader travelling the world, not to mention his time as a boy selling his mother’s codfish cakes around his home city of São Paulo. He’s spent the past three years developing an ecological concern – though he will tell you that he is no biologist either.

His career has coincided with the rise of a new Brazilian economy, a long process of changes that began in the 1980s. “Back then, we went to the streets to bed down democracy,” he recalls. “Lift-off, however, really only began in 1994 under (then finance minister) Fernando Henrique Cardoso with his economic stabilisation plan, known as the Plano Real, when the government introduced a programme of fiscal and monetary austerity.”

order and progress

Professor Carlos Alberto Júlio talks to Optima about how Brazil is laying foundations for a bright future.

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in What Way did the government’s changes become a foundation for building a better future for brazil?In the past, such austerity had never been a firm government commitment and the Central Bank could not avoid the government’s fiscal deficit becoming an uncontrolled monetary expansion. The Plano Real changed this stance, with the Central Bank effectively sterilising all monetary expansion created by government spending.

The results were staggering, with inflation falling in the space of just a few months from more than 40 per cent per month to under 10 per cent per annum. Interest rates were hiked to more than 30 per cent a year, while the newly

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introduced currency was pegged at parity to the US dollar. The Brazilian population, sick and tired of decades of hyperinflation, along with the business community, supported the government, sweeping Cardoso into power in the November 1994 presidential election.

Following Cardoso’s accession, the government implemented wide-sweeping reforms. This included privatisation – even of sacred cows such as resources giant Vale (then known as CVRD), though, crucially, the government retained a so-called ‘golden share’. Other key reforms included approval of laws making fiscal responsibility mandatory in all areas of government; opening up the economy to foreign trade; the Central Bank being given operational autonomy; a managed floating currency; and, in 1999, implementation of an inflation-targeting regime.

it’s all very Well having sensible economic policies and more stable politics – but surely there has to be buy-in by broader society if there are to be lasting reforms?Let’s answer that by first looking at what Lula did. When we elected Lula in 2003, the vast majority of businessmen said that we were done for. We thought he would burn himself out.

We were pleasantly surprised. Lula quickly helped split the PT (Partido dos Trabalhadores, or Workers’ Party) away from the opposition party, and from then on things began to move forward. The PT had a reputation for trying to block change. But coming in to power on a socialist ticket, Lula also had the support of the union leaders – and the strikes ended. At the same time, business leaders realised that Lula

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01 Former Brazilian president Luiz Inácio Lula da Silva with his successor, Dilma Rousseff, during the 2010 presidential campaign

02 The Maracanã soccer stadium in Rio de Janeiro will play host to the final of the 2014 World Cup, the world’s biggest sporting event that year

03 Brazilian aerospace firm Embraer is the world’s third largest commercial aircraft company. Here, work continues on its 170-190 model assembly line

04 There is still work to do before Brazil can become the world’s fifth biggest economy. For instance, a recent report by the National Highway Infrastructure Department says Brazil has only 10 per cent of the roads it needs – and even these are in poor condition

would leave them to do what they do best – look after and expand their businesses. He kept the politicians from interfering and the bureaucrats from constantly changing the rules. For the first time, I saw businessmen forget about the government in Brasília, forget about asking to change the law and asking for benefits, and instead taking care of what they know and do best – which is managing their companies and focusing on their employees, technology and customers.

But this is the important point: it was us, society, who made it work; we gave the government the space to govern. And yet I know many people still have the idea that Brazil is a third-world country where nothing works. I’ve always thought that Brazilians worked hard, were creative and extremely innovative, but until recently the macro-economic figures, as well as such indicators as the number of patents taken out and new products launched, never matched up to my expectations.

and the 2000s Were something of a decade of recovery, Weren’t they? It began with Paulo Renato, who was education minister in the Cardoso government, creating the inclusive idea of the Bolsa Família. If there is one policy that captures the spirit of Lula’s presidency, it was his championing of the Bolsa Família, a scheme whereby poor families are paid monthly by the government for keeping their children in school. The idea was that if your child stayed in school, the family earned money. When you put money into the lower economic classes, you uplift that class. But, at the top, with needs already satisfied, this income turns into savings. If the savings are not turned into investment, however, nothing

happens. Businessmen do not want money in the bank; they want production and companies working. We discovered through this Bolsa Família programme that, when we inject money into the lowest economic classes, people are able to go out and at least buy basic staple goods like rice and beans.

So, as a result of the Bolsa Família, we started to see a rapid uplift of the people at the bottom of the ladder. It is estimated that nearly 30 million moved into the ranks of the middle class between 2006 and 2009. Right at the top, the reforms led to our national champions growing even bigger and competing on a world scale. Petrobras is almost up there with the leading oil companies, with its value now matching Qatar’s annual GDP; Vale is now the world’s No. 2 mining company by market capitalisation; Embraer has become an aerospace company of international renown... and the list goes on.

It is no exaggeration to say that the Bolsa Família, along with the state’s investment in health care, laid the foundation for Brazil’s emergence as a global power.

Trade has also boomed. Our bilateral trade with China has expanded at an annual compound growth rate of nearly 50 per cent over the past decade and, two years ago, China leapfrogged the US to become our biggest trading partner. Two-way trade with China amounted to $54 billion last year, with iron ore, soybeans and crude oil being the leading Brazilian exports, while low-cost manufactured goods have been imported. And our trade surplus with China is running at well over $5 billion per annum.

There has also been a surge in foreign direct investment into Brazil – which began the moment foreign investors realised that Lula was not going to change the economic

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01 Oil exploration vessel owned by Petrobras, now a global energy leader, in the Campos basin near Vitória 02 Workers weld car frames at General Motors do Brazil, the second largest subsidiary of the corporation outside of the US

03 Soy harvesting in Correntina, Bahia. Brazil’s soybean exports reached a record high in 2011, with China the primary destination

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rules. Take global miner Anglo American and its capital investment programme. It’s now ramping up its recently opened $1.9 billion Barro Alto nickel project here. And Brazil is where Anglo American is spending over $5 million on just the first phase of its biggest project of all – the Minas-Rio iron ore mine, treatment plant and 529-kilometre pipeline to a dedicated port now under construction at Açu on the Atlantic coast.

So, we’ve steadily improved our macro-economic stability, building up our foreign reserves to around $300 billion, while reducing the country’s debt profile. At the height of the financial crisis, we did experience two quarters of recession as demand for our commodity-based exports fell. But we were one of the first big economies to emerge from the downturn, with the maintenance of financial discipline domestically being boosted by a recovery in exports.

and the 2010s? Where is brazil headed noW?Well, how did the major economies become what they are? The US, Japan, Germany? By building their economies. When you build your country, you gain in productivity. In Brazil, we have economic, financial and institutional stability – but with everything still to be done. So this has to be the decade of infrastructure.

The report by the DNIT (National Highway Infrastructure Department), which says we only have 10 per cent of the roads needed – and they are in poor condition – illustrates this. So we don’t have enough highways, and somebody has to build them. We do have plenty of airports, but very few that are fit for purpose in the 21st century. And we have relatively few railways for a country the size of ours – and hardly any passenger traffic on them outside our major cities. The planned 500-plus-kilometre high-speed rail line to link São Paulo and Rio de Janeiro has suffered delay after delay.

Despite these constraints, we are rapidly becoming a major economic power... So I am tired of hearing the old ironic description of Brazil as a sleeping giant that will always have a good future. Brazil is also the country of the present. And we can go from being the eighth economy to the fifth by around 2025 if we change the face of this country – in services, in products, in quality, in education.

hoW do you see the role of the state?Given our many, and potentially conflicting, development needs, I see the state’s role as the regulator, and as the one that determines priorities. I also think it likely that the shift in recent years towards a greater role for the state in the economy will continue. Recently, we’ve seen the way in which it used its ‘golden share’ in Vale to steer the company towards greater inward investment in Brazil. The state has also increased its stake in Petrobras, signalling a greater role for it in the development of our oil and gas and ancillary industries. And if one considers the sheer scale of our infrastructure requirements – some reckon, for example, that the Sao Paulo-Rio high-speed rail link will cost nearly double the government’s estimate of $33 billion – I think it’s unlikely that some of the biggest projects will get off the ground without state help.

brazil is quite a bureaucratic country; do you feel this is hindering its development?To many outsiders, Brazil appears complicated – with our high import duties; myriad of federal, state and municipal

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1982brazil halts payment of its main foreign debt, which is among the world’s biggest.

1986president José sarney introduces the plano Cruzado, freezing prices and wages in an effort to control inflation. but high inflation returns when the freeze is lifted.

1994fernando henrique Cardoso is elected president after helping to bring inflation under control with the plano real. the modern real is introduced as currency.

1997resources firm vale is privatised. it will establish itself as one of the world’s great diversified mining companies through a series of joint ventures and acquisitions.

1998the imf provides a rescue package to brazil after the economy is hit by the collapse of asian stock markets.

2002Currency hits an all-time low and financial markets panic over the prospect of left-winger luiz inácio lula da silva becoming president.

2003the bolsa família social welfare programme is launched to provide financial aid to poor brazilian families.

2008anglo american, operational in brazil since 1973, acquires 100 per cent ownership of iron ore asset minas-rio.

2010brazilian energy company petrobras conducts the largest share sale in history, becoming the world’s fourth-largest company by market capitalisation. dilma rousseff of lula’s Workers’ party becomes brazil’s first female president.

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“i’m tired of hearing the description of brazil as a sleeping giant. We are rapidly becoming a major economic power. We can go from being the eighth economy to the fifth by around 2025 if we change the face of this country.”Carlos alberto júlio

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taxes; confusing taxes on products; and complex labour laws. I think mechanisms have to be created so that, as a country, we become less bureaucratic – and the market will have to play its part in this process. This movement of simplifying the bureaucracy lies at the core of the tax reforms, and is key to rationalising the bureaucracy in other areas.

Unfortunately, structural reforms needed to improve competitiveness and lift GDP growth are not progressing as fast as I would like. During Lula’s second term, simplification of the tax system was shelved – though it is close to the top of current president Dilma Rousseff’s agenda. Other issues, too, such as tax, pension and labour-market reform were put on the backburner, along with plans to strengthen the regulatory framework and improve the quality of public spending.

hoW do you see the groWth of the brazilian economy in terms of its importance in the World, together With the other bric countries?The countries which sustained growth during the recent global recession were the BRICs (Brazil, Russia, India, China), and particularly China as a result of its huge government economic stimulus. But there has also been a critical shift in mindset towards the BRICs. All of a sudden, the G8 (the US and the ‘big seven’ – the United Kingdom, France, Germany, Italy, Japan, Russia and Canada) have had to understand that there are billions more people to consider. We have to open up this club. The richer countries need to have a greater awareness that they need to rescue others. Africa, for example, is often forgotten. There are a lot of opportunities there – gold, iron ore, oil – and a population that exceeds one billion – and it needs to be brought forward.

My hope is that, with the increase in this club, comes an understanding that the world does not just consist of the northern hemisphere, and that there is not just one geographic shift in economic power, from the West to the East. In the southern hemisphere, we have Brazil, Australia and most of Indonesia and, between them, South Africa, with its status as a ‘new BRIC’.

Looking at Brazil itself, South America’s regional leader, let me reiterate that we have a well-managed economy, whose hallmarks remain a commitment to inflation targeting by the Central Bank, a floating exchange rate and fiscal restraint. Our economy is now a $2 trillion-plus one and is growing at around five per cent a year and attracting large capital inflows. Brazil has become an attractive destination for foreign investors; at the same time, our national-champion companies continue to expand internationally.

The country has a huge internal market that now exceeds 190 million people, a big labour pool and a rapidly growing middle class that is underpinning our continuing growth. We have vast natural resources, especially in the agriculture, mining, and oil and gas sectors, and we are a world-leading commodity exporter. Within the next 15 years, I think we will become No. 5 in the world in GDP terms. I just hope that we’ll get there in a sustainable way.

sustainability is a neW direction you’ve taKen in your business career. Why the change? Three years ago, I saw the global warming documentary An Inconvenient Truth – and that was a turning point for me.I asked myself, could the mother ship earth really have so many problems? Could it be that we are destroying it much faster than we imagine?

Al Gore’s presentation awakened my environmental curiosity. I attended an event in Spain, where Gore expressed his frustration at Americans who did not believe that what was happening on the climate-change front was serious, and at the US government for not having signed the Kyoto Protocol, or appearing to show a willingness in confronting the whole issue of global warming, despite the country being the world’s biggest polluter at the time.

That night, I had dinner with Gore and I was convinced that he was sincere, that his proposals were more than

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political. He said, “What we think is going to happen in 10,000 years is actually going to happen 40 years from now. Even if we won’t see it, our children and grandchildren will.”

When the world began speaking about reducing CO2 emissions and about renewable energy sources, we started a movement to first stop harming the environment, and then begin the process of recovery. My hope is that governments and people will note that they need to fix this problem.

If it is your child and your grandchild who will pay the price; things change. You take a shower, not a bath; you don’t keep the air-conditioning on unnecessarily. Mining companies will use trucks that run on hydrogen rather than diesel. You use an electric car for short distances. The problem is that ecology is expensive. This is why people resist.

hoW do you convince people and governments – particularly at a time of global recession – not to taKe the easy, short-termist path and rather looK to longer-term, sustainable solutions?Let me give you an analogy. I have a friend who has a country home in Canela in the east of Brazil. He went to Lebanon and brought back a seedling of a cedar tree, their national tree. He told his gardener to plant it and that it was very important that he cared for it by pouring a cup of water on it every day. Time went by and the tree did not grow. The gardener told his boss the plant was sick. The boss explained that’s how the

tree was, and it would take 20 to 30 years to become an adult tree. The gardener asked why the boss wanted to plant a tree that he would never see become fully mature. I realised then that it is not only politicians who think in the short term. Our society today has only the short term in mind.

It’s a reflection of western society as a whole. The cedars of Lebanon grow upwards an average of 20 centimetres a year. But downwards, their roots grow a metre and a half. Look what nature teaches us. It looks for nutrients and water. Once it finds them, which can take 20 years, it can survive for 500 years without any human attention.

While we’re on the subject of trees... Brazil has 20 per cent of the world’s biodiversity. We need to manage this. We have come in for a lot of criticism regarding the Amazon, for not restricting the loggers and farmers enough, driving highways through the region and so on. But, on balance, we are not destroyers. Almost two-thirds of native Brazilian forests are reserved, compared to only 26 per cent in the US.

I believe, we have to copy nature and draw lessons from it on how we should be building this new economy. We have the resources, a domestic market and a middle class on a scale that can take on the world. But we also have a unique opportunity to show that we have a truly sustainable economy, where people look to the long term, not just in terms of environmental care, but also in terms of investment in business, in infrastructure and in our people.

01 02 Brazil has vast natural resources. Developments such as Anglo American’s Minas-Rio iron ore project (01) in the Port of Açu, due to open in the second half of 2013, and its new ferronickel plant, Barro Alto (02), are boosting the country’s status as a major mining commodity exporter

AN

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book reVieW

do business people need to apologise for pursuing their vocations? Some of the world’s

most powerful interest groups, ranging from the Roman Catholic Church to the secular intelligentsia, have always argued that the answer is “Yes”. Can you think of a Hollywood film that presents business people as anything other than moral monsters? Or a single novel for that matter? What is more surprising is that so many business people agree with them. John Browne, one of Britain’s most successful chief executives, called his autobiography Beyond Business. MBA students have taken to swearing “Hippocratic oaths” to the effect that they will behave better than their elders. Google’s motto, “Don’t be evil”, is designed to differentiate itself from the rest of the corporate herd.

The most powerful business fad of the current era – corporate social responsibility, or CSR – is based on the idea that business is guilty until proved innocent. CSR has transformed itself into a mighty ideological machine over the past decade. The United Nations has a Global Compact for corporate social responsibility. Britain’s 2006 Companies Act requires companies to report on their social and environmental impact.

America even has a National Corporate Philanthropy Day (25 February) with its own colours (blue and green). And CSR has largely done so by playing on business people’s guilt and insecurity. As Clive Crook, a former deputy editor of The Economist, has put it, “CSR is the tribute that capitalism everywhere pays to virtue.”

What is “responsibility”?Ann Bernstein’s new book, The Case for Business in Developing Economies, is a devastating rebuke to this fashion. Bernstein skilfully dismantles the intellectual assumptions that underpin CSR. What exactly does ‘responsibility’ mean? Giving money to the local opera or introducing a ‘triple bottom line’ (including people and the environment as well as profits)? To whom are

companies ‘responsible’: society at large or the places where they do business? And if they are responsible to society, what on earth does that mean? Does society really have a common collective interest? Or is it an arena for competing interests and pressure groups?

Ms Bernstein demolishes the foundation stone of CSR: that business people have something to apologise for, that they are engaged in a disreputable activity that needs to be redeemed by good works.

General Electric employs 320,000 workers with 700,000 dependants. It helps to support 600,000 pensioners and five million shareholders. More than 660 million people a year travel on planes powered by its engines and 230 million people have scans on its imaging machines. GE produces about a third of the world’s electricity and is constantly investing in innovative technologies. That is surely something to celebrate rather than apologise for. The sins of Bernie Madoff et al tell us nothing more about business than the sins of various academic fraudsters tell us about academia.

Some of this may be familiar. Milton Friedman sounded the clarion call against corporate philanthropy as far back as 1976. Crook and the chief

the Case for business in Developing eConomiesby ann bernstein penguin, london 2010, 397 pages

Review by adrian Wooldridge

time to stop saying sorry?

“When it comes to the developing world in particular, business people hold the key to a brighter future.”aDrian WoolDriDge

53 noVember 2011 | Optima |

economics commentator of the Financial Times, Martin Wolf, have blown their own trumpets more recently. But Bernstein brings some powerful new arguments to the debate. She points out that it is not enough to argue that business should “do no harm”, as some of CSR’s critics argue. The essence of business is “creative destruction” – thinking up new ways of doing things, disrupting established markets, and generally taking your competitors’ business away from them. This is why all the fashionable talk about sustainability is so dangerous. Business improves productivity (and with it the lives of millions of people) by doing things in new ways, not old ones.

the laW of the emerging WorldHer most important contribution to the debate, however, is to view it through the prism of emerging markets. Bernstein is a native of a country, South Africa, that has suffered from a particularly tortuous relationship between business and politics (she is the founding director of an invaluable think tank called the Centre for Development and Enterprise). And she first got interested in the subject not while sitting in on highfalutin academic seminars, but while attending the hearings of her country’s Truth and Reconciliation Commission. She recalls that most business people were happy to flagellate themselves in public. But Johann Rupert, the son of one of South Africa’s most successful Afrikaner entrepreneurs, asked, in an

exasperated tone, “Would you have preferred Ernest Oppenheimer (the founder of Anglo American) to have settled in Australia rather than in South Africa?”

Bernstein repeatedly flays the high priests of CSR for their wilful ignorance of the emerging world. They self-righteously condemn sweat shops for exploiting the vulnerable. But many sweat shops provide people who would otherwise be unemployed with the first rungs on the ladder to self-sufficiency. They portray giant corporations as malefactors of great wealth. But Anglo American, for example, employs more than 80,000 workers directly in South Africa, and many more than that indirectly. Mobile phone companies such as Nokia and Verizon have revolutionised the lives of the poor, promoting a veritable entrepreneurial revolution. What the emerging world needs is more businesses rather than fewer – and to the extent that CSR makes it harder to create new businesses, it is a disaster for the emerging world.

But Bernstein also flays free-market purists who argue that companies have no responsibilities other than to obey

the law and make profits for their shareholders. The law is much vaguer in the emerging world than in the United States. And the boundaries between companies and society are much more ambiguous. It is one thing to argue that companies’ responsibilities stop at the factory gates in rich countries. It is quite another to make the same argument in emerging markets where governments are incompetent, markets are underdeveloped and chaos is an ever-present threat.

Companies frequently have a short-term interest in creating suppliers, building roads or educating workers. They also have a long-term interest in helping governments to deal with problems such as the HIV epidemic. The very fact that companies are islands of efficiency and innovation in a sea of chaos and traditionalism means that they need to take a long-term view of their interests.

Bernstein not only makes a persuasive case that business people everywhere need to stop apologising. She demonstrates, with just the right measure of passion, that, when it comes to the developing world in particular, they hold the key to a brighter future.

archiVe shot


De Beers Consolidated Mines was formed in Kimberley, South Africa, through the merger of the companies of Cecil Rhodes and Barney Barnato in 1888, by which time it had almost complete control of all diamond-mining operations in the country. By the mid-1920s, Anglo American had become the largest single shareholder in De Beers. Pictured below, a steam shovel assists in the removal of overburden and diamondiferous ore at Kimberley in 1902.

anglo ameriCan: establisheD 1917

DE

BE

ER

S

AT ANGLO AMERICAN, SAFETY COMES

FIRST, SECOND AND THIRD.

SO EVEN IF AN IDEA SEEMS

EXPENSIVE, OR EVEN A BIT UNUSUAL;

WE TAKE IT SERIOUSLY.

THAT’S WHY WHEN DOCTOR

DANIEL BONGERS CAME TO US

WITH A CAP THAT COULD MONITOR

THE FATIGUE LEVELS OF OUR

ON-SITE TRUCK DRIVERS, WE WENT

INTO PARTNERSHIP WITH HIM TO

MAKE IT HAPPEN.

INTRODUCED AT OUR CAPCOAL MINE IN

AUSTRALIA, THE SMARTCAP PICKED UP

AN ANNUAL MINING INNOVATION

AWARD IN 2009.

IT’S JUST ONE EXAMPLE OF HOW WE

MANAGE FATIGUE – WHICH IS HELPING

US MOVE TOWARDS OUR GOAL OF

‘ZERO HARM’ THROUGHOUT OUR

BUSINESS. SOMETHING EVERYONE

IS STRIVING FOR.

FIND OUT MORE, AT

GETTHEFULLSTORY.COM

EMMA COOMBS Capcoal, Australia

WHEN IT COMES TO SAFETY,

EVERYONE PUTS THEIR THINKING CAPS ON

37820 AA_Emma Coombs_Optima Mag_265x210

Client: Anglo American

Description: Press

Artwork Size: 265x210mm + 3mm bleed

Publication: Optima Internal Magazine

Traffic: Max House

Artworker: Proof: DATE:NN 1 26.10.11

Page 1FONTS: DIN

VERY IMPORTANT FOR REPRO: Please check A/W files for correct trapping. This is your responsibility.

AT ANGLO AMERICAN, SAFETY COMES

FIRST, SECOND AND THIRD.

SO EVEN IF AN IDEA SEEMS

EXPENSIVE, OR EVEN A BIT UNUSUAL;

WE TAKE IT SERIOUSLY.

THAT’S WHY WHEN DOCTOR

DANIEL BONGERS CAME TO US

WITH A CAP THAT COULD MONITOR

THE FATIGUE LEVELS OF OUR

ON-SITE TRUCK DRIVERS, WE WENT

INTO PARTNERSHIP WITH HIM TO

MAKE IT HAPPEN.

INTRODUCED AT OUR CAPCOAL MINE IN

AUSTRALIA, THE SMARTCAP PICKED UP

AN ANNUAL MINING INNOVATION

AWARD IN 2009.

IT’S JUST ONE EXAMPLE OF HOW WE

MANAGE FATIGUE – WHICH IS HELPING

US MOVE TOWARDS OUR GOAL OF

‘ZERO HARM’ THROUGHOUT OUR

BUSINESS. SOMETHING EVERYONE

IS STRIVING FOR.

FIND OUT MORE, AT

GETTHEFULLSTORY.COM

EMMA COOMBS Capcoal, Australia

WHEN IT COMES TO SAFETY,

EVERYONE PUTS THEIR THINKING CAPS ON

37820 AA_Emma Coombs_Optima Mag_265x210

Client: Anglo American

Description: Press

Artwork Size: 265x210mm + 3mm bleed

Publication: Optima Internal Magazine

Traffic: Max House

Artworker: Proof: DATE:NN 1 26.10.11

Page 1FONTS: DIN

VERY IMPORTANT FOR REPRO: Please check A/W files for correct trapping. This is your responsibility.

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