Commodity downturn could get worse in 2016, warns Cutifani

JOHANNESBURG (miningweekly.com) – Anglo American CEO Mark Cutifani expected 2016 to be the most challenging year for the mining industry, stressing in a copy of a speech delivered at the Investing in African Mining Indaba, in Cape Town, on Monday, that things could get worse before getting better.

He noted that the depth and length of the commodity downturn was forcing mining companies to look at themselves in a different light and to respond accordingly.

He added that the mining industry had itself to blame for the oversupply in the market and cautioned that miners should not rely on a reversal of the commodities price slump anytime soon. 

“Adjusting supply to align with decreasing demand growth may not make sense as companies seek to maintain market share and drive competitors out of business. This strategy generally has a net negative effect,” he said.

He stated that Anglo would exit a number of its mines in several countries around the world this year to ensure the company was able to retain its long-term competitive edge and build a more resilient investment platform.

“Transforming the operational performance of the company, while also taking the hard but necessary choices about some of our assets, has been an essential part of turning around the ship in what I have always said would be a five-year exercise,” he said.

Meanwhile, Cutifani stated that South Africa, like many other countries, was experiencing the fall-out from the global economic pressures and the effects of the downturn in commodity markets.

However, he lauded the South African mining industry for putting its weight behind government’s Operation Phakisa initiative, showing an appreciation for government’s recognition of what needed to be tackled urgently – from broadband constraints, to agricultural reform, to the competitiveness of the mining industry. “It is a global market, not only for mining, and South Africa must be in a position to compete.”