optima volume 60

OPTIMAAUGUST 2014

TAKING RESPONSIBILITY

INTERVIEW: SIR JOHN PARKER ON ENGINEERING CLEAN COAL: NEXT-GENERATION ELECTRICITY SISHEN: CONFIGURING FOR THE FUTURE RHODIUM: PLATINUM’S VERSATILE SISTER METAL

INITIATIVE FOR A MORE ETHICAL MINING INDUSTRY LAUNCHED

02 | OPTIMA | AUGUST 2014

WELCOME

This year we have seen the release of a set of international standards for responsible mining which will form the basis of a certification system that will verify whether or not mining sites are operating responsibly. The Initiative for Responsible Mining Accreditation (IRMA) (page 14) is a multi-stakeholder, multi-commodity project, which Anglo American has championed since the outset, and represents a significant step forward in enhancing the mining sector’s social responsibility and sustainability credentials.

The ultimate aim is to make our world a better place, a theme explored by our Chairman, Sir John Parker (page 6), who is also the outgoing President of the UK’s Royal Academy of Engineering. Sir John firmly believes that a constantly innovating engineering sector is vital if we are to meet the many challenges that lie ahead in the mining industry and the world as a whole.

Innovation is helping that effort at the FutureGen venture in Illinois in the US (page 38). We are a founder member of an alliance that is retrofitting an existing coal-fired power plant with carbon capture technology in order to prove the commercial viability of carbon-neutral power stations.

Economic viability is the yardstick when it comes to our continuing operations all over the world. We are implementing changes throughout our business to ensure we are extracting full value from our assets: at Sishen in South Africa, we are reconfiguring the mine to ensure that it delivers to its full potential (page 22); and we are transforming our Marketing business (page 30).

CONTENTS

MARK CUTIFANICHIEF EXECUTIVE, ANGLO AMERICAN

22 LIFE IN THE OLD MINE YETReconfiguration at Kumba Iron Ore’s Sishen pit is securing its future for years to come.

30 MARKETING DRIVEAn ambitious shift in strategy aims to ensure Anglo American generates more value by marketing its products better.

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, The Woolyard, 52 Bermondsey Street, London SE1 3UD, England

Redhouse Lane production teamEditor: Ben McCormickArt director: Colin GoadDesigner: Jorge ValleProject manager: Rosamund Croft

Distribution enquiries: Bev [email protected]

38 COAL CLEAN-UPProving clean coal can be commercially viable is the aim of an industry joint venture at a US power station.

04 DIGESTInnovation in mining, the fungus that aids opencast pit rehabilitation and a significant diamond milestone celebration.

06 INNOVATIVE FUTURESir John Parker believes more engineers are needed to overcome 21st century challenges.

44 RHODIUM RETURNSDespite fluctuating fortunes, platinum’s rarer sister metal rhodium is enjoying a resurgence in price and demand.

PETER NOLANProfessor Peter Nolan CBE has researched, written and taught on a wide range of issues in economic development, globalisation and the transition of former planned economies. He has researched subjects such as comparative development in China and India; the transformation of large Chinese firms since the 1980s; and the evolution of China’s system of political economy. He currently holds the Chong Hua Chair in Chinese Development and is Director of Cambridge University’s Centre of Development Studies. PAGE 48

03 AUGUST 2014 | OPTIMA |

CONTRIBUTORS

48 BOOK REVIEW The profit-seeking firm is at the core of transformation in the modern world, according to a new book by Sir Mark Moody-Stuart.

OTHER CONTRIBUTORS BEN MCCORMICK (PAGE 14) BRUCE KENNEDY (PAGE 38) CAROLINE WILLIAMS (PAGE 44)

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, publications (print and online) are welcome to reproduce articles in whole or in part and to use illustrative material, except where copyright © is especially reserved.

14 IRMA AND RESPONSIBLE MININGNew standards have been launched with the aim of certifying responsible mining that respects human rights, provides safe, healthy workplaces, minimises harm to the environment and leaves positive legacies.

CORBIS

SIR JOHN PARKERSir John Parker has served as CEO, Chairman or Non-Executive Director in more than 20 major UK and overseas companies. He is currently Chairman of Anglo American plc, President of the Royal Academy of Engineering, Deputy Chairman of container port operator DP World and a Non-Executive Director with Airbus Group and cruise ship group Carnival Corporation. He was knighted in the New Year’s Honours List in 2001 for Services to Shipbuilding and the Defence Industries and was appointed GBE in the Queen’s Birthday Honours 2012 for Services to Industry and the Voluntary Sectors. PAGE 6

CHARLOTTE MATHEWSCharlotte Mathews writes about mining for the Financial Mail and Business Day in Johannesburg. She has 25 years’ experience as a financial journalist, working for wire services in South Africa and London as well as daily, weekly and monthly publications in South Africa, covering a range of sectors from retail to personal finance. She has a BA in History from the University of the Witwatersrand and a postgraduate diploma in journalism from Rhodes University. PAGE 22

DAVID TURNERDavid Turner is a freelance writer on economics and investment issues. He had a long career at the Financial Times, as both a domestic and foreign correspondent. Currently writing a history of Britain’s public schools, David studied History at Cambridge University and is an observer for the British Trust for Ornithology.PAGE 30

OPTIMA NEWS


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

COAL'S STAYINGPOWERCoal will be a major player in the global power sector for years to come, according to a research paper published by an International Energy Agency consultant.

Despite efforts to diversify power sources, coal will remain a dominant fuel for at least the next 25 years, the paper says. It also argues the development of carbon capture and storage technology will be crucial to “reconcile the ongoing importance of coal-fired power with the global environmental objectives”.

While coal use is declining in OECD countries, the fossil fuel is set to be a significant driver of power output growth in China, India and other ASEAN countries, the report claims.

Namdeb (a joint venture between De Beers and the Namibian government) is deploying two 286-tonne machines to suck precious stones from sediment up to six metres thick on the Atlantic seabed.

With advances in technology, there has been a fourfold increase in the area the crawlers are able to mine in an hour, from 250 m2 to 1,000 m2. Their reliability and efficiency have been key factors in safeguarding the marine side of Namdeb’s business. Kevin Richardson, manager of research and development at De Beers Marine, says: “The marine mining business would probably

have ended in the mid-2000s if it had not been for the major technological changes that have come along.”

Elsewhere, new technology will soon help De Beers mine marine diamond deposits in mid-water depths. Namdeb has been working on the technology that would enable it to mine gems in gulleys and rocky underwater areas at 30 to 50 metres instead of its current depths of 90 to 140 metres.

DIAMOND CRAWLERS

1,000 m2UP TO

MINED IN AN HOUR

DIAMONDS ARE FOREVERMARKForevermark, the De Beers diamond brand, has celebrated a significant milestone as its one millionth diamond was inscribed at the Forevermark Diamond Institute in Antwerp, Belgium.

The inscription represented the brand’s promise of a commitment

to rare, beautiful and responsibly sourced diamonds.

“The fact that every inscription number is unique and always identifiable as your very own adds to the allure of our brand offering,” says Forevermark chief executive officer Stephen Lussier.


Anglo American’s Coal business has developed and patented a bioconversion technology that could significantly aid opencast mine rehabilitation efforts.

Fungcoal – a $1.5 million project that harnesses fungi and weathered coal – works on the ability of certain fungi to break down and liquefy coal that has been exposed to the elements. When accompanied by other micro-organisms, they create natural fertilisers regarded as essential for soil fertility and plant life.

Trialled at four Group mines in South Africa – Kleinkopje, Landau, Greenside and New Vaal – the technology has already shown positive results.

Mines without miners are fast approaching reality as the technology boom in robots, drones and driverless trucks is steadily reshaping the industry.

Technological advances in drones, robots and other areas of automation are expected to help mining companies carry out operations in ever more remote areas of the world.

Anglo American is among those pioneering a high-tech approach, in the hope it will help cut costs, improve safety and efficiency and exploit resources only found in hazardous areas.

BREATHING LIFE BACK INTO OPENCAST MINES

KEEPING UP WITH THE DRONES

Modern technology is helping mining companies around the world improve productivity, reduce costs and create safer working environments.

The use of fibre optic cables and underground WiFi networks – along with computers able to process huge amounts of data quickly and efficiently – is allowing the industry to address traditional areas of inefficiency.

Companies such as Anglo American, BHP Billiton and Rio Tinto are deploying automation technology such as unmanned vehicles and drones that enable them to achieve operational efficiencies, but they are now on the brink of a step change in their business processes too, thanks to communications technology.

Data feedback from operations means problems can be addressed in a fraction of the time it used to take, while sensors in drill holes allow miners to understand their resources more fully and quickly.

MINE OF INFORMATION

MINE OF INFORMATION


INTERVIEW

Providing an ever-growing world population with food, water and energy is one of the biggest challenges facing us in the 21st century. Anglo American chairman Sir John Parker believes engineering will provide some of the answers.


ENGINEERING OUR FUTURE

DAVID

CO

TTER


of the heart’s pumping action. It’s an incredible amount of engineering and innovation, and just the kind of thinking we’ll need to address the challenges we face.”

For Parker, the issue is not whether engineers are up to the challenges, it’s whether or not there are enough engineers to deal with them.

“The thing that concerns me most is that we don’t have sufficient engineers,” he says. “There’s no question there’s a huge amount of innovation going on in engineering, but to maintain that momentum we need to encourage more people into the discipline at an early age. The good news is, we’re already seeing that happen, both within the engineering community and – in the UK at least – through government policy.

“We’re already seeing evidence that this is having a positive effect. A recent survey published in the Financial Times about teenagers showed for the first time that engineering was almost at the top of the most-wanted careers list, alongside medicine,” says Parker. “There’s a cultural shift going on in this country, but so much more needs to be done in all societies to attract young people at an early age into designing and constructing things. There’s a lot of effort going into this, with many people – myself included – going into schools and talking to young people to explain what engineering is all about. That kind of ‘missionary’ work is very important.”

STATE SUPPORT“Equally crucial is the message the State sends out about its priorities. Fortunately, for the first time, the UK government has instituted a modern industrial strategy based on what it sees as key sectors – aerospace, the auto industry, pharmaceuticals, for example – and they’ve also selected eight great technologies that research communities should be focusing on, one of which is robotics, which has significant potential impact in the mining community.

The adoption of an industrial strategy is a critical development, and one which the Royal Academy of Engineering has passionately championed.

“From the prime minister down, there are clear signals coming out of government that a large part of the UK economy is going to be driven by industrial activity.

Engineering is all around us – it is ubiquitous – yet it’s remarkable how few people realise the extent to which it touches their everyday lives.

While other branches of science pick up the plaudits and prizes for changing the

world, engineering has traditionally been regarded as something people in white coats and overalls do in factories. But despite this stereotyped image, engineering has quietly been getting on with solving the world’s practical problems since before the invention of the wheel.

Sir John Parker – who studied naval architecture and mechanical engineering – believes it’s engineering that will help the world deal with the challenges it faces in the coming years.

“It’s difficult to single one thing out,” he says. “But among the top priorities mankind has today are feeding the world, and providing everyone with enough water and energy. Housing and health are also huge issues, and engineering – in all its different fields – has to address these.

“But I have enormous confidence in today’s engineers. The bandwidth of engineering is so much wider than when I started all those years ago, particularly in areas such as biomedical and medical engineering.

“When you think of devices designed to support a damaged aorta, for example, the engineering that goes into such a small thing is absolutely huge. It has to be able to withstand the artery-insertion process, then its extension by a balloon system to match the diameter of the aorta, then it’s got to cope with the fatigue risk

INTERVIEW

“ There’s a cultural shift going on in this country, but so much more needs to be done in all societies to attract young people at an early age into designing and constructing things.”


CR

OS

SR

AIL

A tunnel boring machine is lowered into place as part of London’s Crossrail project. Innovative tunnelling technology such as this is now being deployed in the mining industry, as Anglo American has done at its Los Bronces copper mine in Chile (inset)

AN

GLO

AM

ER

ICA

N

MARKETING

explores innovations in the sectors. The Academy also administers the global Queen’s Award for Engineering, a £1 million (c.$1.7 million) Nobel-style prize open to engineers around the world and awarded every two years. Last year’s winners were Tim Berners-Lee, Robert Kahn, Vinton Cerf and Louis Pouzin for their pioneering work on internet technologies.

“Highlighting and celebrating innovation is vital in attracting people into the discipline,” says Parker. “And there’s no question there’s a huge amount going on at the moment. Real innovative thinking. One trend in this country is that more engineers are becoming entrepreneurial, coming out of university and starting their own businesses, which is a wonderful thing.

“And, at the Academy, during the past year we have started an Enterprise Hub, at which a hundred of our fellows – who are outstanding engineers with experience of successfully starting up businesses – have volunteered to give a day of

“By that, I mean a broad church, from research through to product development, new products and new technical services across the whole range of wealth creation where that engineering is deployed today. State support and tax breaks for research and development have an important role to play in creating an innovative society and, here in the UK, the government has aligned its budget not only to blue-sky research but also to applied engineering at our universities. That kind of policy sends out a clear message that engineering is one of our top priorities.”

As President of the Royal Academy of Engineering, Parker has overseen the development of two significant initiatives designed to promote engineering and innovation in the UK and around the world.

The Academy’s ‘Innovation in…’ series of seminars, which has been running since 2012, aims to showcase some of the most recent advances in a range of different sectors. Each focuses on technological developments being made and


“ It’s absolutely critical we in the mining industry keep abreast of the latest developments in other industries. Advances in digital engineering, mathematical modelling, computer-aided design, structural and modular engineering – all of these are critical if we are to ensure safety, control our investment costs and build greater efficiency in our mining operations.”

INTERVIEW

01

SC

IEN

CE

PH

OTO

LIB

RA

RY

DAV

ID C

OTT

ER


mathematical modelling, computer-aided design, structural and modular engineering – all of these are critical if we are to ensure safety, control our investment costs and build greater efficiency in our mining operations.

“If you look at the construction industry, advances in modular building and digital engineering processes are things we need to adopt. We can learn a lot from companies such as Laing O’Rourke in the UK, whose chairman Ray O’Rourke is on Anglo American’s board. They are doing some pioneering work whereby they can transfer up to 60 per cent of a building site’s work content into a huge factory, thereby reducing site work at the actual location

their time per month to help develop innovative ideas with young, aspiring entrepreneurs. This is the kind of support that can help make a real difference and is a welcome trend.”

While meeting the myriad challenges of making the world a better place is engineering’s ultimate goal, on a practical level there are many things it can bring to industries such as mining to help improve efficiency and, above all, create a safer environment for those who work in it.

“It’s absolutely critical we in the mining industry keep abreast of the latest developments in other industries,” says Parker. “Advances in digital engineering,

SIR JOHN PARKER Sir John Parker studied Naval Architecture and Mechanical Engineering at the Belfast College of Technology and Queen’s University Belfast. He is currently Chairman of Anglo American plc (his fifth FTSE 100 chairmanship) and President of the Royal Academy of Engineering.

He is Deputy Chairman of DP World (the world’s third-largest container port operator) and a Non-Executive Director with Airbus Group and Carnival Corporation (the world’s number one cruise ship group).

Sir John was knighted in the New Year’s Honours List in 2001 for services to Shipbuilding and

the Defence Industries and was appointed GBE in the Queen’s Birthday Honours 2012 for services to Industry and the Voluntary Sector.

His wide range of interests includes: reading, music, sailing and his four grandsons. He is also a member of the Royal Yacht Squadron and other yacht clubs.

02

CO

RB

IS

01 Hummingbird bionic robot that uses a tiny motor and can flap up to 30 times a second to achieve flight, with greater stability than a helicopter

02 Development of a bionic arm at the Princess Margaret Rose Hospital in Edinburgh, Scotland. Medical devices are prime examples of the ways in which engineering is helping humanity deal with its ongoing challenges

MARKETING


INTERVIEW

01 During his time as a non-executive director of the British Coal Corporation (1986-1993) Sir John Parker goes underground in a colliery supplying the Drax power station in North Yorkshire in the north of England

02 Boron-doped chemical vapour deposition (CVD) diamonds, developed by supermaterials company, Element 6, part of the De Beers Group, for use in next-generation sensing systems for the biomedical, food, pharmaceutical and oil and gas industries

01

PIONEERS OF THE PASTWhen it comes to innovation, Sir John Parker singled out two engineers in history as being years ahead of their time.

“For me, Isambard Kingdom Brunel was one of my early heroes. And every time I cross one of his bridges, I think about him – even if I couldn’t get home recently owing to the railway line he built along the Dawlish sea wall in south Devon being breached during the massive storms we experienced earlier this year. But the fact that it’s stood so long is testimony

to Brunel’s achievement. I think he was way ahead of his time.

“If you look nearer the modern era, I think Sir Frank Whittle (right) of jet-engine fame stands out. The medals he won are all down at the Royal Academy of Engineering and he was one of the Academy’s early fellows. He’s someone who I really think of as a pioneer; a real innovator. The great engineers of the world are innovators. They are problem-solvers. They have the ability to change the world.”


and improving safety, quality, efficiency and cycle time to build. At Anglo American, we are already learning valuable lessons from these new techniques and technologies, and are now deploying them on potential new mining developments. Our technical director Tony O’Neill is already working intensely on adopting the most modern methods and design tools available. That is a huge area of focus for us, as we must utilise the most modern engineering and construction techniques if we are to build our current projects on time and to budget, and establish a track record we can be proud of.

“Another incredibly interesting area is robotics and autonomous systems. The next generation of intelligent machines that could, for example, mine in difficult or hazardous conditions and take the real drudgery and danger out of some of our tougher mining situations. Our ambition above all has to be to create a safer environment in which to work, and that means providing our people with the most modern equipment and tools to operate with as much automation as possible.

“But to get step change, we need to deploy new management and planning systems as well. Our chief executive Mark Cutifani has said the mining industry can no longer make only incremental, component-based improvements; it’s imperative we innovate, too. To do that, we need to combine the deployment of the latest technological developments with the adoption of the most modern methods of working – that’s what will create the efficiency and competitiveness we need for the future.”

“ Another incredibly interesting area is robotics and autonomous systems. The next generation of intelligent machines that could, for example, mine in difficult or hazardous conditions.”

02

CO

RB

ISE

LEM

EN

T SIX


IRMA

A global, multi-stakeholder initiative aims to introduce multi-commodity standards for responsible mining that will improve social and environmental performance and also the mechanism through which to verify and certify it, writes Ben McCormick.

Altering the landscape: northern Chile is the single-largest source of copper anywhere and features some of the biggest, and deepest, open-pit mines in the world


MINING THAT ADDS REAL VALUE

CO

RB

IS


spectrum, including physical location, environmental management, labour and affected communities and corporate governance. Chapters of IRMA’s standard, currently undergoing the first round of public review, cover human rights, social issues, pollution control and related environmental and worker-related issues.

While international standards already exist for individual commodities – such as those for diamonds and gold, for example – and although it’s by no means certain all the world’s mining organisations will seek certification once the standards are agreed, the initiative nevertheless represents a major development for the mining sector.

“It’s the first multi-commodity standard of its kind in our industry,” says Jon Samuel, Group head of government and social affairs at Anglo American plc. “International responsibility standards exist for many sectors, including agriculture, forestry and other commodities such as coffee, but so far there hasn’t been one that covers all the resources we mine.

“IRMA is seeking to address that by introducing a single stamp of approval that shows – at the mine-site level – that you’re mining in a responsible way, recognised by a broad set of stakeholders.”

Jeweller Tiffany & Co. has supported IRMA since the beginning, recognising the value in its multi-sector, consensus-based approach and believing it will

A mining industry that respects the human rights and aspirations of affected communities, provides safe, healthy and respectful workplaces, avoids or minimises harm to the environment and leaves positive legacies.

That’s the bold vision of the Initiative for Responsible Mining Assurance (IRMA), a multi-stakeholder initiative established in 2006 that aims to introduce initial certification of responsible mining in 2015.

The physical process of mining has an impact on the communities and the environment in which it occurs. Loss of habitat, water contamination and people displacement are all potential consequences of mining.

The search for more resources continues in order to satisfy the ever-increasing demand for mined materials, and so the likelihood of negative effects can only increase if it remains unchecked.

Participants in IRMA, however, believe these can be avoided or mitigated if companies operate responsibly, which is why it is developing a comprehensive standard for responsible mining, building on existing best practices and developing an independently verified mining assurance certification system to monitor compliance with it.

IRMA’s standard is expected to encourage more responsible mining across all aspects of the sustainability

In July 2014, IRMA releases the first draft of its Standard for Responsible Mining for public consultation.

IRMA FUNDAMENTALS

IRMA standards are targeted at industrial-scale mines. IRMA collaborates with initiatives for responsible small-scale and artisanal mining.

IRMA


AN

GLO

AM

ER

ICA

N

Inspecting fall-of-ground lights at Bathopele, a deep-level Anglo American platinum mine. “International responsibility standards exist for many sectors, including agriculture, forestry and other commodities such as coffee, but so far there hasn’t been one that covers all the resources we mine.” Jon Samuel, Group head of government and social affairs at Anglo American

MARKETING

01 At Anglo American’s Quellaveco copper project in Peru, a model of the proposed mine and processing facilities is shown to representatives from the local Moquegua community as part of a successful ‘dialogue table’ between the company and the host community


AN

GLO

AM

ER

ICA

N

02 Tiffany & Co. is a member of IRMA’s steering committee and has been a supporter of IRMA from the outset

01

IRMA

COMMERCIAL GAINWhile clearly a laudable initiative, it also recognises that more responsible mining could bring significant commercial benefits to the industry as well reducing the impact of its activities.

“All stakeholders can gain from mining more responsibly,” says Samuel. “On the downstream side, there’s growing consumer pressure for responsibly sourced minerals. Initiatives such as the Responsible Jewellery Council and Bettercoal demonstrate this.”

Tiffany & Co. recognises a growing trend in customers making purchasing decisions based on a company’s corporate responsibility reputation.

ultimately serve as the most comprehensive standard on responsible mining.

“We believe IRMA will do much to improve the entire industry by motivating mine operators to work towards, and ultimately achieve, certification,” says Anisa Kamadoli Costa, Vice President, Global Sustainability & Corporate Responsibility at Tiffany & Co. “We’ve witnessed great success in similar certification initiatives, such as the Forest Stewardship Council, in raising the bar for an entire industry and increasing consumer awareness of responsible practices. Because IRMA includes the same key components – credibility in the marketplace through a multi-stakeholder approach and independent third-party verification – we hope this initiative will have similar success.”

Like many certification initiatives, IRMA will build on and complement the existing work of other organisations, such as the International Council on Mining and Metals (ICMM) and the International Finance Corporation (IFC) Performance Standards.

IRMA works across all locations, commodities and mine types.

However, IRMA does not provide assurance for oil, gas, coal,

uranium and other energy fuels.

IRMA aims to build on other sustainability standards

initiatives for the extractives sector to provide complete

solutions for certification, traceability and labelling.


“We believe IRMA will do much to improve the entire industry by motivating mine operators to work towards, and ultimately achieve, certification.”ANISA KAMADOLI COSTA VICE PRESIDENT, GLOBAL SUSTAINABILITY & CORPORATE RESPONSIBILITY, TIFFANY & CO.

02

©A

ND

REW

BO

RD

WIN

MARKETING

Visibly polluted, this river in Mindanao in the Philippines shows the after-effects of nickel mining


CO

RB

ISIRMA


monitoring – and the certification body will require organisations to implement the standards throughout.

“Our priority is to agree on the standards – not an easy consensus to reach – and we have just released the first standard for public consultation,” adds Samuel. “Next steps will be to run pilots to assess feasibility, the potential administrative burden and how certification will work in practice.”

Getting buy-in from groups most affected by mining, while an ambitious goal, is one of IRMA’s great strengths, according to Costa.

“Through the inclusion of these various perspectives – from labour groups, non-profit organisations and affected communities to downstream users and mining companies themselves – we expect IRMA to be widely accepted by groups often critical of mining operations as well as those actually implementing the standards,” she says.

According to Samuel, the real test will be in 2015, when IRMA launches the agreed standards. “Gaining critical mass is essential to this initiative’s future. But equally important – and a good measure of IRMA’s overall success – will be seeing the standards included in regulations such as those for the building or manufacturing industries. Acceptance from industrial customers and regulatory bodies will go a long way towards helping IRMA achieve its ambitious vision.”

“Increasingly, customers are expecting responsible behaviour, particularly from their preferred brands,” says Costa. “If that expectation isn’t met, it has the potential to affect a brand’s reputation.”

Further ahead, it’s envisaged the operational and reputational benefits of certification could bring commercial benefits to those organisations that have adopted the standards. These may range from reduced risk during project development, if mines are operated to standards with NGO endorsement, to being a preferred supplier to customers that are concerned about the provenance of their raw materials.

“As consumers continue to vote with their purchases – and that includes the business-to-business segment too – mines that integrate robust environmentally and socially responsible practice will have a competitive advantage,” adds Costa. “The interconnectedness of global supply chains combined with the ever-increasing scrutiny of business operations will act as both a reward for companies acting responsibly and an incentive to improve operations and work toward certification.”

Samuel sees this as a developing trend. “While the initial focus of consumers has been on jewellery products, and although responsible sourcing isn’t particularly high on the agendas of most industrial customers at present, it probably won’t be long before we hear demands for more transparency and sustainability from them too,” he says.

“For example, the general public and subsequently parliaments in Germany and the Netherlands have already put pressure on utility companies to demonstrate how and from where they source coal to produce power. There’s a good chance governments and the public will extend their attention beyond just coal.”

CERTIFICATION REQUIREMENTSIRMA is aiming for a site-specific standard applicable to industrial-scale mines, rather than to small-scale or artisanal mining.

Once agreed, IRMA certification requirements are expected to cover all phases of a mine’s life cycle – from exploration to decommissioning and post-closure

AUTHORBEN McCORMICK

Ben McCormick is a business writer, award-winning editor and blogger. He writes for a wide range of business, construction and engineering magazines.

IRMA STEERING COMMITTEE MEMBERS

Anglo AmericanCanadian Boreal InitiativeEarthworksIndustriALL Global UnionJewelers of AmericaTiffany & Co.United Steelworkers Western Shoshone Defense Project

NEW DIRECTIONFOR SISHEN


STRATEGY: SISHEN

864.1 MILLIONTONNES OF PROVEN AND PROBABLE RESERVES

Sishen iron ore mine, 14 km in length, is one of the biggest open-pit mines in the world. Even though it has so far produced more than 900 million tonnes of iron ore, it still has 864.1 million tonnes of proven and probable reserves. Operations there

are expected to last about another 20 years. The mine’s haematite deposit is of particularly

good quality. It has a lump to fine ore ratio of 60:40

compared with a global average of 30:70 and is a low-cost producer. Some of its product is sold to the local steel industry, but most is exported.

Inevitably, as a mine gets older and deeper, it becomes more complex and costlier to operate. Configuring Sishen in the most efficient way means better returns for Anglo American and Kumba Iron Ore shareholders, keeping jobs for the community and maintaining taxes and export revenues for the government.


The south westernarea of the G80 pit

at Sishen iron ore mine, where massive

calcrete wastestripping is taking

place to expose thetargeted iron ore

orebody below

60:40 LUMP TO FINE ORE RATIO

15-YEARLIFESPAN

“ We have... defined a new approach and rigour to our capital-allocation process in order to help achieve our target.” MARK CUTIFANI, CHIEF EXECUTIVE, ANGLO AMERICAN

ALL PHOTOS: ANGLO AMERICAN

She’s 61 years old this year, but she’s not on the brink of retirement yet. Sishen mine has adapted to secure its future, reports Charlotte Mathews.

STRATEGY: SISHEN


After his extensive review of the Group’s business units last year, Anglo American chief executive Mark Cutifani set a target to restore shareholder value, which has slipped at Anglo American as it has in most mining companies around the world. Cutifani is targeting an attributable return on capital employed (ROCE) for the Group of at least 15 per cent by 2016. ROCE, which is annualised operating profit divided by capital employed, measures how well a company is using its funds.

MINING DIRECTION “We have... defined a new approach and rigour to our capital-allocation process in order to help achieve our target,” Cutifani stated in the latest Anglo American annual report.

Kumba CEO Norman Mbazima said Kumba’s ROCE was already well above 50 per cent but obviously any improvement would benefit Anglo American’s average.

Sishen’s orebody dips in a westerly direction at 11 degrees. The old mining direction was from south to north, covering the full 14-kilometre strike length. Now, to more efficiently access ore, the mining direction has

been switched by 90 degrees, from east to west, which means more waste has to be extracted.

In 2013, total tonnes mined at Sishen rose by 22 per cent to 208.8 million tonnes (Mt) (2012: 171.6 Mt). Of that, 167.8 Mt was waste, 26 per cent more than the previous year. This was reflected in the mine’s iron ore production falling by eight per cent to 30.9 Mt from 33.7 Mt in 2012.

Anglo American technical director Tony O’Neill said at the Group’s investor day in December 2013 that, if Kumba carried on mining as usual, it would see production rise from 30 Mt per annum (pa) in 2013 with 175 Mtpa of waste to 31 Mtpa in 2014 with 220 Mtpa waste, 33 Mtpa in 2015 with 255 Mtpa of waste and 34 Mtpa by 2016 with 270 Mtpa of waste.

“There would be a recovery. That recovery would be very slow. And, along with that very slow recovery in ore produced, there would be a rapid increase in the amount of waste that would have to be moved to try to get the speed of ore exposure back into some sort of balance, at least,” says O’Neill.

22% INCREASE INMINING IN 2013

“In some areas, the mining direction has now been switched around by 90 degrees to improve the rate of advance. Access routes out of the pit have been simplified, which can improve fleet productivity by up to 20 per cent.” TONY O’NEILL, TECHNICAL DIRECTOR, ANGLO AMERICAN

20% IMPROVMENT IN

FLEET PRODUCTIVITY


Inset The Sishen Western Expansion

project has involved moving

several kilometres of railway tracks,

including bridges

01 A shovel capable of moving 108 tonnes in one

scoop, used to remove calcrete in the south western

part of the pit

01


STRATEGY: SISHEN

Management has devised a new mine plan, which will eliminate about 600 Mt of waste from the life-of-mine plan, and also introduces ways to work smarter, Mbazima says.

The new mine plan would target a faster increase in iron ore produced in relation to waste mined so that, by 2016, Sishen will be mining 37 Mt of ore with 270 Mt of waste. That is the level where waste will peak. Mbazima

Haul truck operators changing shift. Hauling has been optimised at Sishen following a mine-management restructure

says it will remain at that level for three to four years, and then reduce.

Andrew Loots, executive head of operations at Kumba, says the pit constraints started to emerge in 2008 after Sishen commissioned its new jig plant to beneficiate a mix of ‘A’ and ‘B’ grade material. As the jig plant ramped up, the ‘B’ grade resource did not materialise as expected.

After detailed definition of more ‘B’ grade material, it became evident that about 800 Mt had to be written off from Sishen’s deeper resources. To feed the jig plant, Kumba had to actively mine more ‘B’ grade material, which complicated the execution of the mine plan, as well as add more ‘A’ grade material.

At the same time, the stripping ratio, which is the proportion of waste to ore, rose to 4:1 from 2:1. To expose

“Production will be maximised in two ways: through optimal design of the pit so that mining is sequenced to get the best ore-to-waste ratio, and through greater efficiencies.”ANDREW LOOTS, EXECUTIVE HEAD OF OPERATIONS, KUMBA


more ore, the mine’s vertical rate of advance, which was around 35 metres a year, had to be accelerated to 80 metres a year.

O’Neill says in some areas the mining direction has been moved by 90 degrees to improve the rate of advance. Access routes out of the pit have been simplified, which can improve fleet productivity by up to 20 per cent.

Loots says the new plan for Sishen has several elements, the first step being to optimise the mine plan with a new understanding of the resource.

He says production will be maximised in two ways: through optimal design of the pit so that mining is sequenced to get the best ore-to-waste ratio, and through greater efficiencies. Kumba looked at eight different push-back options.

Early steps on which Sishen is already well advanced include moving a railway line and associated infrastructure and relocating about 300 households from Dingleton to Kathu, both of which enable the mine to be expanded to the west.

Once Sishen Iron Ore Company was granted the mining right over the former railway land, it was able to access approximately 33 per cent of the Sishen reserve, which meant this ore could be reclassified from probable to proven.

The board has approved around $400 million over four to six years to relocate Dingleton and the first households are expected to move by the end of this year, Mbazima says.

Loots says this year management will put in place the business-process framework on the internal mining

OPTIMA REPORT

01 Diedre van Wyk, plant operator at the jig plant. The work of Sishen’s Women in Mining Committee has contributed to a more than doubling of the number of women at technical training centres

02 Geological profile of Sishen. The diagram shows levels of low-grade jig ore deposits, high-grade DMS (dense media separation) ore deposits and waste

01


STRATEGY: SISHEN


management structure. External experienced advisers are being used to help Sishen set up its pre-stripping more efficiently.

SUSTAINABLE FUTURE “We have a huge commitment from the Sishen team to make this successful,” Loots says.

“Our new mine plan has given us more confidence about what we can produce, and at what cost,” Mbazima says. “We have also optimised that cost. Reducing the amount of waste we mine over the life of the mine will reduce our unit cost over time. We have made our production more efficient and therefore more cost-effective.”

Sishen’s new mine plan means employment will be retained at current levels, and improving productivity not only helps Sishen’s costs but also its sustainability, Mbazima says.

“We have done a lot of technical and geological work and are now confident this is the optimal way to return Sishen to delivering its full potential,” says Mbazima.

business, so that 70-80 per cent of work will be scheduled in detail, rather than the 30-40 per cent of detailed scheduling that used to be the case. This system is now going live. In the pre-strip area, the first target will be the ‘low-hanging fruit’ where improvements can be made until the business-process framework is rolled out.

Equipment efficiencies are being targeted to reduce investment in the truck fleet, with a focus on improving availability, Loots says. This includes managing work attendance. Management is also focusing on ways to reduce waste in the haulage cycles, through moving refuelling stations in the North pit, optimising hauling destinations so that each shovelling area has the right number and types of trucks, and revising the mine-

Charlotte Mathews writes about mining for the Financial Mail and Business Day in Johannesburg. She has 25 years’ experience as a financial journalist, working for wire services in South Africa and London as well as daily, weekly and monthly publications in South Africa, covering a range of sectors from retail to personal finance.

AUTHOR CHARLOTTE MATHEWS

“Our new mine plan has given us more confidence about what we can produce, and at what cost.” NORMAN MBAZIMA, CEO, KUMBA IRON ORE

ORE

CURRENT PIT

PROFILE OF SISHEN PITCurrent pit and remaining ore/waste

EAST WEST

DIRECTION OF DEVELOPMENT

Low-grade JIG ore (>58.5% Fe)

High-grade DMS ore (>64.5% Fe) Waste

02

Anglo American mines iron ore, coal, copper, nickel, niobium, phosphates, platinum group metals and diamonds – but has it been extracting full value from its assets,

or leaving ‘rich seams’ untapped? David Turner reports.

LOREM IPSUMMARKETING


VALUE EXTRACTION

01 Iron ore from Kumba, destined for China, is loaded at the dedicated iron ore terminal at Saldanha Bay on South Africa’s Atlantic coast. Group companies have started to charter ships for a specific period of time rather than merely for a single voyage. Anglo American then devises the route so a vessel has a minimum number of days without cargo on board


AN

GLO

AM

ER

ICA

N

MARKETING


01

AN

GLO

AM

ER

ICA

N

The belief that Anglo American can generate more value from the way it markets and sells its products is behind its ambitious plan to transform its marketing operations: the entire value chain from the mine gate to the end-customer.

As Peter Whitcutt, the Group director in charge of Marketing, puts it: “What we are about is something which is not revolutionary. But it is about recognising there is a part of the value chain between mining and the end-customers, in the sales and marketing space, which is very distinct and, if one doesn’t do it really well, one can end up giving away value which our mining colleagues are working so hard to create.”

If the Group’s new approach is successful, the prize is $400 million in extra earnings before interest and tax (EBIT) by 2016 – with most of it coming from revenue increases rather than savings, according to Heike Truöl, the Group’s head of commercial services within the Marketing business.

Truöl identifies four principal ‘levers’ that need to be pulled in order to reach this prize. These are:


01 Anglo American Platinum’s Modikwa mine in South Africa. The company’s less well-known platinum group metals, such as ruthenium and iridium, are now more proactively sold to customers

02 Coal being unloaded in Qinhuangdao, Hebei province, China. The country is one of Anglo American’s key metallurgical coal customers

02

ALA

MY

$400 mearnings before interest and tax (EBIT) by 2016

Marketing excellence – getting the basics right when it comes to selling Anglo American’s products

Trading – buying and selling to capitalise on market opportunities

Optimising products – for example, blending products to create the precise quality desired by individual customers

Optimising the value chain – creating an efficient flow all the way from the mine to the market, so that the right customer gets the right product at the right time and price.

MARKETING


In fact, the first steps into trading have already been taken, with a pilot currently under way in the thermal coal area of the company’s Coal business.

“We are taking a carefully managed approach to moving into trading, focusing primarily on asset-backed trading – that is, buying and selling physical materials and using associated financial trading tools to manage the price and delivery risks,” explains Zaheer Docrat, head of marketing and sales for thermal coal.

The thermal coal market is ideal for this approach. While it is becoming a more liquid market, there remain a number of imperfections that can be exploited to create more value. For example, at any point in time it may be possible to realise a higher price for a particular product in Europe than in Asia, or vice versa.

Key to this strategy is the sourcing of third-party volumes to supplement the company’s own equity coal. This gives it more options, for example, to blend different coal

Having started down this road in 2012, Anglo American has already identified the initiatives that will deliver the value, with 60 per cent of the $400 million target coming from projects that are already well advanced. The challenge is both to keep these initiatives on track and to continue to identify and pursue new opportunities.

So far, much of the progress towards the target has come from what Truöl calls “the low-hanging fruit” of marketing excellence. This includes increasing profit margins by making more sales directly to customers rather than through intermediaries. Another example is the more proactive approach the company is now taking to selling minor metals such as ruthenium and iridium, which are by-products of the platinum mining process.

However, looking ahead, trading and value chain optimisation will play a greater role in helping the company towards the $400 million mark, according to Truöl.


Optimising the full value of this chain is Anglo American’s fourth lever, and it involves understanding precisely what the market is demanding and when, then adjusting production and logistics to meet that market demand at the right time. This is a strategy for both the short and the long term.

Truöl cites thermal coal as an example of how this can be applied. Anglo American may forecast a higher need for coal at Indian power stations, which can consume coal with less heating value (calorific value) than some other markets, such as Europe. As Anglo American can produce coal of different grades, it can respond to this demand by increasing the production of lower-calorific-value coal at its mines and then shift its shipping resources to get it to the Indian market while the demand is still high.

However, adjusting production in response to fluctuations in demand is merely one element of the optimisation equation: Anglo American must also time the

qualities to better meet customer needs and command a higher premium or to switch supply between markets to capture the best returns available at any point.

Anglo American’s move into trading comes at a time when commodity markets in general are becoming more dynamic, with the business models of miners and traders converging. A number of commodity traders are moving into production, whether this is through buying physical assets or merging with producers and, although Anglo American’s strategy involves going in the opposite direction, both strategies can be seen as moves to create more integrated operations that ‘own’ the entire value chain from mine to market.

Anglo American’s Singapore office, one of the Group’s two marketing centres along with London. Moving teams closer to customers will help them better understand their needs

“We want to get directly in contact with end-customers and provide them with a superior service.” ALEX SCHMITT, HEAD OF MARKETING AND SALES, BASE AND SPECIALTY METALS

AN

GLO

AM

ER

ICA

N

MARKETING


AN

GLO

AM

ER

ICA

N

Construction of the 529-kilometre-long pipeline that will transport iron ore in slurry form from the Minas-Rio site to the dedicated export port of Açu on Brazil’s Atlantic coastline. Minas-Rio is one of the Group’s largest capital expenditure projects and is expected to be shipping ore by the end of the year


According to Alex Schmitt, head of marketing and sales for base and specialty metals, and former head of the commercial co-ordination function: “Up to 25 per cent of the cost of bulk commodities sold to the customer comes from shipping and other costs not related to the actual mining of the product. So cutting shipping costs will translate into lower delivered cost and higher profit margins for Anglo American.”

Anglo American cannot pull any of these four levers unless it embraces a key concept – that of getting to know the customer better. Central to this is its recent move to replace its nine export marketing offices around the world with twin offices – in London and Singapore – that are part of a single integrated team. “Historically, marketing teams would have sat in countries where the commodities were produced,” says Truöl. “But now, the Copper person who used to sit in, say, Chile, is selling copper from London or Singapore – much closer to their customers in Europe or Asia.” Being closer to the market in this very literal sense means teams are able to spend much more face-to-face time with customers, really getting to know them and understanding their needs. They are also, crucially, located in the same place as other sales team members, to encourage collaboration and the sharing of best practice.

“The basic principle of our new marketing model is that we want to be more customer-centric,” says Schmitt. “In essence, this means we want to get directly in contact with end-customers and provide them with a superior service.”

As an example of how getting to know the customer can reap benefits, he cites the case of nickel, which Anglo American had always sold in containers. In discussions with customers, however, it was discovered some clients found it more convenient to have smaller packages in big bags. In response, Anglo American now provides a different packaging solution so nickel can be sold in smaller units.

When Anglo American’s strategy for its Marketing operations is achieved, will it be more like its competitors or less like them? Truöl thinks it will be more differentiated, because of the breadth of its ambition. “We are going further down the path of integration than most other companies,” she says. It’s a complex but eminently realistic ambition, because much of the knowledge necessary to achieve it has already been in the company for years. Anglo American now has the grand plan necessary to capitalise on that knowledge.

logistics correctly, so the coal arrives at the port just in time for loading on to the cargo ship. If it arrives too early, it will take up valuable storage space at the port for longer than necessary. If it arrives too late and the ship is forced to wait, this will incur extra costs.

Truöl cites the example of UPS, the global distribution company that guarantees delivery within a certain number of days, as an illustration of good practice. “We can learn from companies such as UPS, with its sophisticated optimisation systems,” she says.

SHIPPING CONSOLIDATIONShipping is, of course, a key step in getting products to customers – and Anglo American is playing an increasing role in this stage of the process. The Group plans to raise its freight book to 50 million tonnes by 2016.

As part of its plan to achieve this, it has brought all its shipping activities together into a single shipping team within the Marketing business and is increasingly using its global scale and reach to achieve better freight rates and reduce costs and cargo turnaround times. An example of this is the approach it now takes to chartering ships. In the past, Anglo American would typically charter a vessel for a voyage carrying mined commodities from one part of the world to another, paying for the cost of the ship both for the outbound journey and the return journey, when the ship was empty.

However, the Group is now starting to charter ships for a specific period of time rather than merely for a single voyage. Anglo American then devises the route so a vessel has a minimum number of days without cargo on board. This means a vessel that makes a journey from South Africa to China may then go straight on to pick up materials in Indonesia, deliver them to India and then back to South Africa, and so on – keeping the vessel loaded for a much greater proportion of the time on charter.

AUTHOR DAVID TURNER

David Turner is a freelance writer on economics and investment issues. He had a long career at the Financial Times, as both a domestic and a foreign correspondent.

50 mtonnes shipped

by 2016

XXXXXXXXXX XXXXXXXX


CLEANING UP COAL

A pioneering project in the US aims to show coal power plants with almost zero carbon output can be a commercial reality.

Bruce Kennedy investigates.

FUTURE GENERATION


CLEANING UP COAL

As you’re reading this, there are 2,300 coal-fired power plants busily generating electricity around the world.

Coal is a major source of the world’s energy. So-called emerging economies rely on it heavily. China, for example, gets through twice as much coal as the US every year1.

The trouble with coal is that it’s bad for the environment. Those 2,300 power plants are a major contributor to climate change – according to Greenpeace2, they create around 40 per cent of the world’s carbon dioxide (CO2) emissions3.

Anglo American is aiming to reduce at least some of those emissions by becoming a partner in FutureGen 2.0 – a project that will retrofit an existing coal power plant in the US to cut its carbon output to almost zero.

“It’s the first of its kind,” says Nikki Fisher, coal stewardship manager at Anglo American’s Coal business in South Africa. “We got involved as part of our strategy and response to climate change.

“It’s all very well sitting back and saying you can make coal cleaner. But this is an actual attempt to show it can be done commercially.”

Coal-fired p;ower station in Yangzhou,

China. Dirty it may be, but coal is cheap and

abundant – and is likely to be a key

component of the world’s energy mix for decades to come. As worries about global

energy security intensify, a burning

issue is how to commercially harness

coal’s energy so it becomes a

cheaper and cleaner power source

ALA

MY

1 It’s also the fastest growing global energy source. Coal consumption increased by nearly 60 per cent from 4,600 million tonnes (Mt) in 2000 to an estimated 7,200 Mt in 2010. (International Energy Agency)

2 The International Energy Agency report (December 2012) projects coal’s contribution to global greenhouse gas emissions to increase from 40 per cent to 50 per cent over the next 25 years

3 The release of methane (which has a global warming potential 23 times higher than CO2 but only persists in the atmosphere for 12-17 years) is a particular problem from underground mines. In 2010, methane emissions

from US coal mining were one per cent of overall US greenhouse gas emissions. (Center for Climate and Energy Solutions)


FUTURE GENERATION

Anglo American was an early member of the FutureGen Alliance – the non-profit organisation behind the project. The partnership was set up to look at ways of making coal a cleaner energy source.

ALLIANCE OF MAJOR PLAYERS“The Alliance came together in 2005, with Anglo American joining in 2006,” says Julian Beere, executive head of strategy, business development and infrastructure at Anglo American’s Coal business. “All the companies involved are major players in the coal industry.”

FutureGen Alliance members include Alpha Natural Resources – one of America’s leading producers of coal and mining services – and Joy Global, a major mining equipment company. Coal-to-copper miner and trader Glencore is also on board.

“The coal business has a pretty poor public profile at the moment,” says Beere. “It’s seen as being the dirtiest

fuel available. We’re hoping this project will prove the industry is committed to finding ways of making coal combustion cleaner.”

FutureGen 2.0 will be the Alliance’s only project – it’s why the partnership was formed in the first place. It will see a retrofit of an existing coal-fired station near the US town of Meredosia, Illinois.

The project will install new equipment at the site – equipment designed to capture at least 90 per cent of the station’s carbon emissions and store them safely. The aim will be to turn the Midwest power plant into a near-zero CO2 emission facility.

“It’s all about getting as much electricity generated from the coal with as few of the environmental impacts as possible,” says Beere.

OXY-COMBUSTION PIONEERSThe 168-megawatt project is the first in the world to use oxy-combustion on a large scale. Oxy-combustion involves burning coal with purified oxygen to produce a clean CO2 emission stream.

This emission stream is easier to capture than the diluted CO2 produced by some other methods.

“We’re confident the project will be a success,” adds Beere. “We’ve got commitment from the US government and from industry. All the technology we’re using is proven.”

CO2 created during the electricity-generation process is captured and compressed. It will then be pumped to a storage site deep below the earth’s surface where it can be stored permanently. The process is known as carbon capture and storage (CCS).

BURNING ISSUE

Coal combustion created 14.8 billion metric tonnes of CO2 in 2012, according to the BP Statistical Review of the World’s Energy. That’s an increase of 55 per cent over the 10 years from 2002.

That 14.8 billion figure represents 43 per cent of all CO2 emissions. Around three billion of that 14.8 billion is down to the destruction of forests. That makes coal’s share of those emissions 39 per cent.

Growth in coal consumption has been responsible for two-thirds of the total increase in man-made CO2 emissions in the last decade. It overtook oil as the biggest source of greenhouse gas emissions in 2006.

More than 70 per cent of power-sector CO2 is from coal.

The International Energy Agency estimates that 70 per cent of the cuts in CO2 emissions needed to avert the worst of climate change will have to come from coal.

All this makes the development of cleaner coal even more important for the future.

of the world’s CO2 emissions are from coal power plants

39%

14.8 bntonnes of C02 created by burning coal in 2012

55%increase in C02 over 10 years from 2002


Goodbye to all that? “The coal industry

has the opportunity to be part of

the worldwide climate solution by responding proactively to

the current paradigm shift.”

Christiana Figueres, Executive Secretary

United Nations Framework

Convention on Climate Change

ALA

MY


FUTURE GENERATION

Bruce Kennedy is a former BBC journalist and producer, specialising in making complex scientific and technical subjects accessible to intelligent lay audiences. For the World Service and Radio 4 he has worked on flagship programmes, including Science Today and All in The Mind. He has written two best-selling works of crime fiction and is currently working on a third.

AUTHOR BRUCE KENNEDY

“If we want to combat energy poverty, more than half the electricity we’ll need will have to come from coal.”Julian Beere, executive head of strategy, business development and infrastructure at Anglo American’s Coal business

AN

GLO

AM

ER

ICA

N


FUTUREGEN 2.0 – THE TWO-MINUTE GUIDE

“CCS is proven technology,” says Fisher. “It uses a deep saline aquifer (a layer of porous rock) about a kilometre below the surface. The CO2 is pumped down into the aquifer where the pressure keeps it in a liquid form.”

The liquid CO2 (known as supercritical CO2) in the rock formation is sealed off by a layer of non-porous rock above it. This acts like a cap on a bottle, keeping it in. An extensive monitoring system will make sure the CO2 does not leak.

Initial financial backing for the plant came from the US Department of Energy, with $1 billion pledged in government money. Venture-capital funds are now stepping in to invest cash.

And the project already has a customer – the state government of Illinois has signed up to buy the electricity the converted station will generate.

EFFECTIVE TECHNOLOGYIt all sounds like good news for the coal industry – and the planet. But not everyone is that keen.

“There has been some opposition from the Sierra Club (a US-based environmental pressure group),” says Fisher.

“They see carbon capture as a get-out-of-jail-free card for the coal companies – an excuse to keep burning coal.”

Fisher says the system to be used for storage is safe and effective.

“I’m confident in the technology,” she says. “I’d be quite happy to live in a house on top of it.”

Anglo American sees FutureGen 2.0 as a key part of showing the coal industry is taking climate change seriously.

“We acknowledge the impact of coal combustion on climate change,” says Beere. “But if we want to combat energy poverty – provide energy access for all – more than half the electricity we’ll need will have to come from coal.

“We think the FutureGen project will be a major milestone in showing that advanced coal technology can be used to address the need that millions of people have for electricity around the world.”

“The project is all about proving what can be done,” adds Fisher. “We believe it’s possible to reduce emissions to zero. This is a first step towards a low-carbon economy. We’re proud to be involved in its development.”

Construction on the station is due to start later this year, with commercial operations beginning in 2017.

• Anglo American joins the FutureGen Alliance in 2006.

• The FutureGen 2.0 project involves retrofitting an idle US coal power plant in Meredosia, Illinois with carbon capture and storage (CCS) technology.

• The project aims to capture 1.1 million tonnes of CO2 each year – at least 90 per cent of the plant’s carbon emissions. Other emissions will be reduced to near-zero levels.

• FutureGen 2.0 is backed by over $1 billion in grants from the US Department of Energy.

Artist’s impression of the FutureGen facility in the US state of Illinois

PA IM

AG

ES

THE RHODIUM ROLLERCOASTER

What do you give to a music legend with more platinum discs on his wall than most of us have family photos? Something even rarer and more valuable – a rhodium-plated disc. And that is

exactly what the Guinness Book of Records did in 1979 to mark Paul McCartney’s achievement as the most successful singer-songwriter of all time.

To the average person on the street – and probably to your average rock star – rhodium is nowhere near as well known as its sister metal, platinum. But for most of us it is hiding in plain sight as a shiny coating on silver and white gold jewellery and responsible for the glass we see daily in the flat screens of our television sets and computers. And, thanks to being a crucial ingredient in the most efficient catalytic converters, rhodium has been riding some serious ups and downs in recent years.

From building cleaner cars to making rock ‘n’ roll history, rhodium has been on the ride of its life, says

Caroline Williams


RHODIUM

45

RhodiumRh

102.9055719.7

[Kr] 4d8 5s1 2.28


SIC

EN

CE P

HO

TO LIB

RA

RY

01 A sample of rhodium, an inert metal and member of the platinum group

RHODIUM


03

ISTO

CK

01 01

02

AN

GLO

AM

ER

ICA

NC

OR

BIS

03C

OR

BIS

01 Car manufacturing in China. The country’s car industry accounts for 25 per cent of the world’s rhodium demand

02 Rhodium is mined along with other platinum group metals in South Africa

03 William Hyde Wollaston discovered rhodium in 1803 after adding nitro-hydrochloric acid to a sample of platinum ore

04 Inclusion of rhodium in catalytic converters meant oxides of nitrogen (NOx) could be removed from exhaust fumes

04 SCIENCE PHOTO LIBRARY

The shiny, white and remarkably unreactive metal was discovered in 1803 by English chemist William Hyde Wollaston. While experimenting with a sample of platinum ore from South America, he added nitro-hydrochloric acid. But while the platinum part of the ore dissolved, another part of it separated into red salts. Hyde Wollaston named it ‘rhodium’ after the Greek word for rose and, after a bit of clever chemistry, found a way to precipitate it into pure, elemental metal.

Soon afterwards it found a use as a coating on sterling silver and white gold to prevent tarnish. But being so unreactive, resisting corrosion and attack by acids that will dissolve nearly all other metals, as well as its remarkable catalytic properties, secured its global role in the manufacturing industries. Today it is widely used as a catalyst in the production of acetic acid and oxo-alcohols as well as increasing the life of alloys used in the production of fibreglass and flat-panel display screens.

Rhodium really hit the big time, though, in the 1980s as it was incorporated into the first three-way catalytic converters. The addition of rhodium meant that, for the first time, oxides of nitrogen (NOx) could be removed from exhaust fumes along with carbon monoxide and hydrocarbons.

SOARING DEMANDThis new role, combined with its being one of the rarest elements in the world, saw the price of rhodium fluctuate in the $300-$4,000 per ounce range from the late 1980s through to the early 2000s. In the mid-2000s, soaring global demand for flat screens resulted in glass manufacturers and automakers competing in this small global market and prices soared – in 2008 it hit a high of $10,000 per ounce, more than 10 times the price of gold.

But this ‘success’ came at a price. Owing to the extreme price rise, manufacturers began to limit their use of rhodium in catalytic converters, using as little as possible and replacing rhodium with palladium, which has similar properties although requiring around five times the mass to achieve the same performance. The amount of rhodium used in glass manufacture was also reduced and aggressive recycling increased secondary supply.

These developments, together with the pressures on manufacturing caused by the financial crisis, meant that the price slumped to lows of around $1,000 per ounce.

But now it seems that rhodium is finally making a comeback. Recovery in the glass industry combined with double-digit growth in China’s car industry has boosted demand. And with the latter accounting for 25 per cent of demand for rhodium, and rising, it is likely that the market for the metal will continue to increase.

Increasing rhodium use in autocatalysis presents a significant opportunity to add sustainable value for both producers and automakers. Palladium’s price has more than doubled to around $850* per ounce since it was first used to substitute for rhodium. And with rhodium’s price still relatively low, switching back to rhodium could save car makers significant amounts of money. Experts say that if rhodium producers offer contractual terms to protect manufacturers from the risk of price spikes, rhodium’s future as a key component of catalytic converters in cars would be significantly enhanced.

This, of course, is good news for Anglo American, which supplies almost half of the 720,000 ounces of rhodium produced globally each year from its mines in the north-west of South Africa. In the immediate future, the introduction of Euro 6 emissions legislation in Europe in 2014, with significantly reduced NOx levels, means that rhodium is being used in catalysts on diesel as well as petrol cars, increasing market demand further.

Rhodium is never found alone – it is mined along with the other platinum group metals as a valuable side-product to the main prize of platinum. Whether as a reward for a rock legend or cleaning air more efficiently, rhodium remains a valuable asset in the platinum portfolio.


To the average person on the street, rhodium is nowhere near as well known as its sister metal, platinum

Caroline Williams is a freelance science writer and broadcaster. As an ex-features editor at New Scientist, she continues to contribute regularly to the magazine. She has also produced and contributed to radio programmes for the BBC’s Natural History Unit for broadcast on BBC Radio 4, the World Service and 5 Live.

AUTHORCAROLINE WILLIAMS

* At time of writing, 5 August 2014


BOOK REVIEW

In the past three decades globalisation has transformed the world. Mark Moody-Stuart’s own career has been at the centre of this process. He

worked for over thirty years in Royal Dutch/Shell, culminating in his chairmanship of the company (1998-2001). He was chairman of Anglo American plc (2002-2009) and is also vice-chairman of the UN Global Compact.

The profit-seeking firm is at the core of globalisation. Unfortunately, few scholars and journalists understand deeply the role that the global firm has played, and few retired business leaders write about the role played by the firm they have led. Insofar as business leaders do write about globalisation, they mostly focus on their personal role. The business section of airport bookshops bulges with ghost-written books by retired global CEOs on the secret of their success and the lessons that aspiring business leaders can learn from their experience. Moody-Stuart’s book is a rare exception and it is especially welcome. It sheds invaluable light from a practitioner’s perspective on almost every key aspect of globalisation, including politics, international relations, corporate governance, corruption, energy and the environment, poverty, inequality and social justice.

Oil and mining are two of the most controversial industries. Both have been plagued with accusations of corruption

PETER NOLAN

RESPONSIBLE LEADERSHIP: LESSONS FROM THE FRONT LINE OF SUSTAINABILITY AND ETHICS BY MARK MOODY-STUART GREENLEAF PUBLISHING, 2014

LEADING FROM THE FRONT

and environmental damage. Each of them has a small group of giant firms at their core that have attracted the ire of NGOs. The era in which Moody-Stuart worked in these industries witnessed a transformation of the global media, exposing global oil and mining companies to continuous and unprecedented public scrutiny. There is wide popular scepticism about globalisation in general and oil and mining companies in particular. This is reflected in films such as The Corporation, in which Moody-Stuart and his wife both appeared.

HUMAN WELL-BEINGMoody-Stuart emphasises the contribution that the oil and mining industries have made to economic development and human well-being. A world without oil, gas, coal, iron ore, aluminium and platinum would be a very different place. Critics of energy and mining companies rarely provide an alternative to the global firm in the provision of key inputs for civilised life. These include cars, trucks, trains, planes, heating and cooling systems and a vast array of consumer goods made from metal, plastic and synthetic fibres.

In the West, Moody-Stuart notes, small firms have played an important role in technical progress, including the advances in fracking technologies in North America. However, the core of technical progress in the oil and mining industries has taken place through competition between giant energy


companies and the leading firms in their supply chain. In developing countries there are few small-scale oil companies. However, there is a sea of small-scale ‘informal’ mining establishments, which employ millions of people in conditions that are far removed from those of small and medium-sized firms in high-income countries. Moreover, they typically damage the environment far more deeply than do large global mining companies, which are under continuous media scrutiny.

RICH EXPERIENCEMoody-Stuart’s book explores the relationship between global oil and mining companies and national governments, especially those in the developing world. He draws on his rich experience in a wide range of countries. He rejects firmly the view that there is a ‘curse of oil’ that pre-determines countries to developmental failure through the impact of corruption. He considers that an abundance of natural resources can provide the opportunity for successful development. The key is the nature of the government. His analysis of the different paths taken in three oil-rich economies concludes: “I take some satisfaction and a little pride in the contribution of oil and gas to the development success of Oman and Malaysia. If you feel some pride in success, you have to accept a share of the blame when the outcome has been less happy, as in Nigeria.”

Moody-Stuart believes the market is critically important to human progress. His book is extremely positive about the function profit-seeking firms have played in the transformation of the modern world, including their central role in innovation and technical progress and their contribution to the advances in human welfare and reduction in global poverty during the

modern era of globalisation. However, far from defending the unregulated free market, Moody-Stuart considers the global firm needs regulation in order to ensure it operates in a way that meets the interests of the whole global community. Regulation should act as a framework guiding the firm’s actions towards behaviour that is in the common interest, rather than crushing the creativity that comes from the firm’s pursuit of profit, which also helps to serve the common interest. For example, in relation to climate change, Moody-Stuart explores in depth the different ways in which global companies can be pushed towards greater energy efficiency and reduced carbon emissions, including regulatory standards for buildings and vehicles, as well as setting a global price for carbon. He considers whether business people should “support sensible regulatory frameworks instead of instinctively arguing against all forms of regulation”. However, he emphasises that devising intelligent regulation requires close involvement of business. The required regulation differs greatly from one sector to another.

POVERTY REDUCTIONMoody-Stuart devotes much attention to poverty reduction in developing countries. He emphasises that although development aid and charitable support can contribute usefully to poverty reduction, they are far from sufficient. He considers that sustainable business is vital for poverty reduction. He argues that global businesses, including those in the energy and mining industries, can make an important contribution to poverty reduction by nurturing local businesses through a wide variety of channels, including working in public partnerships. He analyses the example of China’s remarkable record of poverty reduction. He concludes that it derives from effective government policies, especially in the massive programme of infrastructure expansion, both physical and human, which provides a framework in which the power of ntrepreneurship and market forces can be released.

This is an unusual book. Indeed, it is hard to think of a comparable book written by a global business leader. It should be compulsory reading for anyone interested in the real world of globalisation, whether in business, government or academia.

“Critics of energy and mining companies rarely provide an alternative to the global firm in the provision of key inputs for civilised life.”

Professor Peter Nolan has researched, written and taught on a wide range of issues in economic development, globalisation and the transition of former planned economies. In 2009 he was awarded the CBE for servicessupporting China’s integration into the global economy.

Airbus’ high-tech A350 XWB aircraft. Its use of carbon fibre technology to save fuel is one example of how profit-seeking firms are driving innovation and technical progress in the modern world

AUTHORPETERNOLAN

MA

STER

FILMS / P. P

IGEY

RE

ARCHIVE SHOT


Exploration at Sishen, in South Africa’s Northern Cape province, dates from the early 19th century, but it was only in the 1940s that large-scale exploration began. Following an extensive drilling programme in 1947, commercial iron ore mining operations commenced in 1953, primarily to provide ore for domestic steel mills. Sishen exported its first iron ore in 1976 following the opening of the 861-kilometre Sishen-Saldanha rail link and dedicated export terminal on the Atlantic coast. The mine is the major asset of Kumba, in which Anglo American acquired a major stake in 2002. It is one of the largest opencast mines in the world, with an open pit 14 kilometres long, 1.5 kilometres wide and almost 400 metres deep, and is expected to produce 35 million tonnes of iron ore this year.

KUMBA IRON ORE’S SISHEN PIT2002

KU

MB

A IR

ON

OR

E

COVER:At Anglo American’s Quellaveco copper project in Peru, a model of the proposed mine and processing facilities is shown to representatives from the local Moquegua community as part of a successful ‘dialogue table’ between the company and the host community.

Photo by Anglo American

ISBN 00304050

Printed by F.E. Burman. 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.

optima volume 60

Documents