Anglo American CEO speaks at China Mining Conference

In her keynote speech at this month’s China Mining Conference in Beijing, Cynthia Carroll, chief executive of Anglo American (AAUK-Q, AAL-L), highlighted the key trends and concerns — in the industry.

Carroll, who left Alcan to take the top job at Anglo American in March, said the company plans to increase the proportion of its procurement sourced from China and has set an informal target of achieving a balance of trade between its sales to, and its purchases from, China over the medium term.

So far Anglo American has invested about US$400 million in China, including its US$150 million stake as a strategic IPO investor in Chinese coal producer Shenhua. Last year the company posted US$2 billion in direct and indirect sales of commodities to China.

In terms of commodity markets, Carroll said the “demand fundamentals” look good despite worries about the U.S. economy. She noted that with major metals-consuming economies in expansionary mode and stocks predicted to remain low for most major metals, the price outlook remains solid.

Carroll noted the activity of investment funds has amplified the strength of the commodity cycle and diversified the drivers of demand.

Another factor driving up prices has been the mining sectors inability to significantly expand supply, she said. This has been due in part to limited investment in exploration from the mid-1990s, she explained, but also because it takes longer to bring new projects to account as a result of increasingly rigorous impact assessments and permitting processes. Shortages of capital, equipment, skills and infrastructure bottlenecks have also contributed to the problem.

Carroll noted that cost increases have increased dramatically across the industry including energy, transport and labour costs. Indeed the average capital costs of building a new copper mine are estimated to have grown by an average of about US$200 million, or about 60%, since 2004, she said.

She also warned that supply constraints would continue to trouble the industry. She identified the five key supply challenges as skills, energy, infrastructure, water and community consent.

In terms of labour shortages Carroll said women make up only about 10% of the mining industry. The solution? I see reaching out to the 51% of the population who are hardly present in our operations to be a key response to the skills shortage in countries like Australia and Chile.