Cutting costs must be the industry mantra

Mining companies in
Africa will have to
make some tough
decisions in the next
few years if they are to weather
the current storm that is raging
on with little end in sight.
Rio Tinto’s diamonds and
minerals chief executive,
Alan Davies, said innovating
operations to keep costs as low
as possible was a given for any
company, taking into account
the commodity prices that have
reached decade lows.
“But more energy and more
resources are required the world
over. There will be a continuous
need for minerals and metals
that make modern life work and
so there are still opportunities,”
he said. “But we are going to
have to find ways of solving our
problems in this tough operating
environment. That will include
companies having to make some
tough decisions to get to core
objectives. It is a tight ship that
gets through the storm. We can
wring our hands and gnash our
teeth, but we are going to have
to work together to get through
this.”
He said with investments far
lower than was ever expected,
mining companies would in
all probabiity continue to cut
costs for the foreseeable future
in efforts to strengthen balance
sheets.
Davies said despite this the
company remained committed to
increasing capacity at its Richards
Bay minerals facility. “We have
embarked on a renewed
business discipline. While
we have trimmed global capital
expenditure by billions of dollars
and cut costs significantly we
are also creating capacity ahead
of demand. We have particularly
invested in training programmes
and are ensuring the necessary
skills are in place for future
projects.”
He said there was undoubtedly
a need for companies to be far
more efficient and the tough
decisions that would have to be
made would also impact
on the communities
around mines.
“Governments similarly will
have to do more to remain
competitive for scarce global
investment,” said Davies. “Projects
that are more reliable and more
consistent will win the race for
that capital. This is something
that the new minister of mines
in Guinea has recognised. He
has publicly stated that investors
should be treated with the greatest
respect to make projects a reality.”