Critical minerals in society: Mark Cutifani on Innovation, politics, balance sheet, and how the world will be shaped

The pressing needs of the energy transition have prompted a global surge in forecast demand for metals and other critical minerals over the coming years. Against a backdrop of a fractious geopolitical environment and increasing ESG and other requirements, the mining sector has a lot to grapple with. To discuss these issues and other current themes, Greg Mulley, head of our mining practice in UK and EMEA, sat down with Mark Cutifani, the chair of Vale Base Metals, board member of each of TotalEnergies and Laing O’Rourke and former CEO of Anglo American. Mark makes the case for a more sustainable, proactive and a more thoughtfully presented, purpose driven industry. 

You're a big believer in sustainable mining and in mining being a "force for good". Can you talk a bit about that?

I have always had a social orientation as it relates and connects to mining.  That social orientation dates to where I grew up and my family background.  Most recently, in a lot of work we did at Anglo we were thinking about sustainability as an even more important strategic issue given the trends we were seeing in developing countries – we put it at the front of what we needed to do, particularly given the history of apartheid and Anglo's history as a company. It was becoming the central issue of the industry. If you look at how the major continents have been developed, mining has played the central role in providing a reason to go somewhere to develop a resource, and infrastructure follows. The question we were always wrestling with is how we might use mining as a starting point for the development of infrastructure that serves the community. I'm now even more convinced of the importance of these issues, and the connections between minerals and metals, infrastructure, and the energy transition. For governments and those that are interested in investing in multi-user infrastructure, there's a huge opportunity to create a catalyst for broader economic and social developments.

Congratulations on becoming the chair of Vale Base Metals. How did you choose that or how did it choose you? Did these issues play a part?

Yes, they did. Very simply put, in leaving the industry, I wasn't really thinking about going into a direct or transformative minerals business role. But thinking about these issues, and the work we did with Anglo in the last ten years and seeing how well those things played out for us as a company, we thought that that there's a much bigger game that can be played. I think we can do a lot to help the industry, and help it become a much higher profile industry in terms of the role it plays in society. We are starting to see that in the critical minerals debate, but we've still got a long way to go.

In your role at Anglo you developed many relationships, for example with a lot of the church leaders, which had a connection with local communities. Can you talk about that a little bit more, how that contributes to mining being the force for good and what mining companies should be doing now.

I grew up in a mining community but had no intention of going into mining! It was a personal situation that triggered the interest. One thing we did understand in the city of Wollongong, where I grew up, was the importance of mining to the community, not only jobs, but broader commercial and other social issues as well. Over the years, it struck me in the communities in which we operated, whether it be in outback Australia, Africa, or South America, that while there was no or little government infrastructure, and there were no coherent business structures or groups that were able to really make a difference to the broader social infrastructure.

But there was always a church – and those churches played a key role in bringing people together, from all walks of life.

In working in Africa, it became obvious that if you want to connect with the community, connecting with the church as conveners of the community was probably the best way to get to talk to a broad range of community members. Depending on where we were, there were different groups. Whether they are Catholic, Anglican, Methodist, Jewish, Muslim, Buddhist, it doesn't matter. It's not about religion, but values and beliefs. And so, establishing a dialogue about what's important to that community, the church groups were usually a good place to start those conversations.

Following a speech I gave in Brazil in 2011, I was put in touch with the head of Peace and Justice in the Vatican, Cardinal Peter Turkson from Ghana. We met him and we were able to explain what mining does. A key point which got their attention was that agriculture takes up about 40% of the world's land mass but, without the products of mining, we would need 50% to 60% to feed the world's population. Further, if we couldn’t build “up” in urban environments, our global urban footprint would go from 15% to something like 20% to 30%.  The knock-on effect of this would be an expanded human footprint through agriculture and cities being 20% to 30% bigger than they are today.  That is, the world's 8 billion people would spread over a lot bigger part of the surface of the planet without the products of mining, and that would have a catastrophic impact on biodiversity.

The next key question I was asked was, how much land do you take up in mining? And I said, 0.3% which was the latest number from satellite imaging. Even considering 20 year mine lives and rehabilitation, it's still a small footprint when you look at a 100-year time frame. We then started engagement with the Archbishop of Canterbury and then Muslim and Jewish representatives, and a whole range of people in a dialogue about humanity and people. That's the group that we needed to influence, and by connecting with them it let us talk about a range of other issues.  For them mining became an accessible conversation, and for us, our social impact became a much better understood phenomena.

Turning to geopolitics, the world is a very different place to what it was 10+ years ago, when the main geopolitical threats were different, and it was assumed that China would become part of the broader liberal democracy. That certainly is not the case now.  Increasingly, China is at odds with the West, with a strong hold on some critical mineral production, processing and supply chains, and a lead in EV technology. Where does that leave the rest of the world and the market?

There's no doubt the world is becoming multipolar. China, the US, and India with its more favourable demographics and the amount they are investing in education, are and will be forces to be reckoned with. So, I think that's changing the global geopolitical dynamic.

Meanwhile, Indonesia looks at each of the US and China differently – they will need to engage with both and maybe sometimes play them off against one another, as some African nations are already doing today. So, the world is changing as it always has, relationships are changing, US's engagement has changed, and different players are stepping forward – the Saudis and Brazilians in particular.

For me, the interesting thing is that Vale Base Metals is in the middle of some of those big changes, both in terms of how we've structured the business and in what we're doing in Indonesia. As a UK company with a Brazilian parent, we are based in Canada, have significant assets in Brazil, Canada and Indonesia, are in a joint venture with the Chinese, we have a Saudi 10% holder, a 3% US private equity investor, and are looking to negotiate with the US in terms of offtake and working out a break on the IRA [Inflation Reduction Act] provisions. Our ability to navigate that complexity is a metaphor for where the world is going.

That's a very complicated set of relationships to manage and maintain. How do you navigate those geopolitical challenges?

It's about building relationships on the basis of shared interests and our most basic humanity. It's about who we are as people and connecting, and about being honest and dealing with issues that are important to them, not what we think are the important issues.

For example, at Anglo, probably the most difficult thing we had to navigate was re-domiciling from South Africa to the UK. There were a range of constraints put on Anglo in terms of its cashflow. We had to rebuild trust with South Africa and understand the dialogue from their perspective. They said the foreign exchange rules couldn't be changed; but eventually within seven years they were. That was because we as a group in the country worked with local communities and invested in what was appropriate and didn't betray the pact we made with them. It wasn’t about the logic of investments and returns, it was about who we were and what we represented.

So, it's about who we are as people, being transparent, and understanding conversations from the side of those communities and cultures. It's complex, but if you behave consistently then you have a chance to change any conversation or dialogue.

Getting onto balance sheet and funding, mining companies are better off than they were at the time of the last boom, back in 2010. What does that mean for the industry? What should they be doing?

The industry post the booms is more disciplined in terms of capital investments. The Anglo story shows we did very well. Taking Quellaveco and Woodsmith as two examples, the decisions we made on those types of assets are 20-year decisions, not two-year decisions or within most investor timeframes. You need the courage of your convictions so you can demonstrate how it adds value in that long term context.

That long-term view is critical. I always said if I had listened to the market I would have been fired at the end of year three at Anglo. But at the end of year three we started a seven-year run and outperformed everyone because we did the hard stuff early and we took a responsible approach. But it took time and a very supportive board. Boards and executives are in it together and need to be prepared to make the hard and long-term calls.

In the critical minerals space, we've been seeing a dash to invest broadly and in almost everything. Will there be a pause on that? What should people be thinking?

We're going to see some tears. Some lithium assets will make money, and some won't. We're going to need lots of lithium but probably not as much as the world is talking about. So, investors need to be discerning.

The world is short of copper. Nickel is a bit more complex and will depend on the demand side because there's a lot of nickel to come from Indonesia, so managing the cost position will be critical. In terms of cobalt, platinum group metals and other products, the role of mineral science and technologies are very important, and also the cost of using that science and technology.  You need to be careful about how you move across that continuum in terms of cost, how you deal with the 3 dimensional equations particularly during periods of price volatility which can trigger thrifting, substitution, and increased competition.

Companies that think those things through and position themselves to advantage will do extremely well.

There's been a long tradition of listing mining companies. Do you see that changing? There seems to be a gap between what is required to deliver the energy transition and traditional funding sources. How are these projects going to be funded and what do you see as the role of private equity?

I suspect there will be more private capital. But I still sense there's a nervousness about investing in our industry while it's changing as much as it is, and no one is sure about what that means. When we talked to big investment houses about how things may connect, there was cautiousness. However, if you can develop a mineral resource in a location, build a relationship with local communities, get the government to be supportive, and if the US wants feed and offtake, then you can do something quite different. 

I think equity holders can look at quite good returns with some very good partners that haven't historically worked in the way that we're talking about. The world is changing. The US is now interested in these types of conversations. China has been there for a long time, but there are other players now, and there needs to be more.

Shareholder activists have become a lot more prevalent in the industry over the past few years, particularly with listed mining companies. Engine No.1 is most prevalent in our minds here for causing the boardroom shake up as an activist investor in ExxonMobil. They are now a 3% shareholder of Vale Base Metals. How did that happen? What do you see as their attraction as a shareholder?

Two things were happening in parallel.

My starting point with Engine No.1 was, I don't want to work with an activist. But I think, and I think ExxonMobil now probably agrees, that Engine No.1 had a positive influence on the Board in terms of helping them shape a more transformative strategy, but at the same time still focusing on oil and gas. So that was an interesting point. Then when we met, we talked about minerals, infrastructure and the whole energy transition and they were interested in sourcing critical metals for the US. So, there was an alignment.

Alongside that, when I was asked to consider the Chair role at Vale Base Metals, I said I was interested in doing that if I could buy 3% of the company, with a partner. And then I said to Vale that Engine No.1 is someone who I think can help us think differently.

Joining the conversations between Vale and Engine No.1 and what I wanted to achieve, there was an alignment in approach of how business should do business differently and how to approach the energy transition.

How can we help to address the gap between wider perceptions of mining and the realities of the industry?

The first thing to understand is you need minerals for everything. Many western countries have said mining isn't for them – but who is it for? In the end it's about all of us working together to find a solution as mining is critical to everyone - whether we understand that fact or not.

There are UK academic institutions, one in I've been involved with, who have said they don't want mining companies to sponsor anything because they view mining people as horrible people. The student union of the university was strongly opposed to mining. So, we went down and spent two hours talking about mining in society. At the end, it changed the debate, and now they're willing to work with mining companies so long as they have a responsible approach.

The engagement we had with the church groups is a good example.

We must engage and engage with groups we don't typically engage with.

Can you talk a bit about the role of women in mining, particularly in the context of challenging jurisdictions?

To state the very obvious, women make up more than 50% of the population and the intellectual talent that we need to change the industry, so we should be making mining as accommodating as possible to get that talent in. We clearly have a long way to go.

When it comes to challenging jurisdictions for women, as a company and leaders, we have our values and beliefs.  As long as those values and beliefs are respected in terms of what we do, we're fine with operating in these countries. If we can do something which helps progressive change, we should; but also, we must be careful and not be arrogant by saying another culture is wrong. We must be consistent with our values and give women the same opportunities as men. Everyone has different values and beliefs. But so long as we can operate with our own values and beliefs, you can be a good role model.

Much of the world is far from seeing mining as a force for good. How can that change?

I think the first point is every leader in the mining industry must take responsibility and lead in these conversations. We don't do enough of that. We've all got to be there as leaders and articulate as best we can the positive contributions we make and be willing to be held to account when we make mistakes and be willing to improve the industry.

Industry representative groups can be defined by their members and have no agreement among their members about what they should do, or they can be purpose driven. If you're the latter, that might narrow the membership down, but it positions the body where the organisation is speaking to a future people can buy into. I'd like to see more purpose-led organisations, more education on the benefits of mining and what we do, and a much broader connection with stakeholders on their turf and not ours.

It's about all of us working together and finding the right solutions, and that's critical.