1617 created in the absence of better use of “waste products” from mining. • Improvements in material sciences to reduce consumption of certain materials in large scale applications, that is, being more efficient in the use of what we have. This talks to our previous reference to thrifting. • Material substitution, particularly where materials are in short supply, with more abundant or easier to recycle alternatives being utilized in less-critical performance applications. • Improved mining efficiencies and rehabilitation outcomes – that is, broader application of modern and efficient industrial operating practices. Of course, there are many more things we can do but you get the sense of what we need to be working on. We believe these approaches could further reduce mining footprints over the long term, while also reducing costs and social disruption at the same time. The same logic is also very powerful when dealing with water consumption, energy consumption and associated carbon generation. And let’s not forget labor productivity when talking about efficiency in service of sustainable benefits to society. A sustainably progressive and efficient industry is the key to continuing the improvement journey, in terms of its net positive contribution to a sustainable world. For those that closely followed Anglo American over the period 2013 to 2022, we built our mining strategy around minimizing physical footprints. Reducing water and energy consumption was a conversation that sat comfortably with our focus on labor productivity and capital intensity. These principles became our “raisons d'être” – the starting point for the articulation of our Purpose to “Reimagine Mining to Improve People’s Lives”. A very practical business point was also critical to our thinking. By minimizing all physical footprints, with water and energy consumption and increasing capital and people productivity we would also improve our long-term competitive cost, margins and capital returns. In taking that concept further, we demonstrated how important these key physical drivers are in terms of delivering sustainable cost reductions. If we unpack AA’s 9-year cost improvement performance, we can understand how the group drove real unit cost reductions of ~40%. The broad-based unit cost categories were all understood as components of an integrated improvement strategy. Our average unit cost components were broadly: • Labor 50%, inclusive of internal and contract staff. • Energy 25%, inclusive of mains supplied electrical energy and fuels for mobile equipment. • Consumables 10% across mining and processing. • Parts 15% across all areas. • Overheads 9% across all areas. Overheads and administration (non-production related) represented ~9% of costs spread across operating sites, regional offices and the center. On overheads, it should be noted we had people working at the center dedicated to new growth projects and broader innovation. We did not think of this work as overheads, but as discretionary innovation capital that would either be capitalized or expensed, depending on the outcomes achieved. This approach tied back to the Sustainable Free Cash Flow (SFCF) concept and was justified from the net cash number as a genuine new opportunity investment. Reflecting underlying efficiency improvements for each category, the relative contribution to the total 40% cost reductions achieved at AA were roughly.
RkJQdWJsaXNoZXIy MTM0Mzk2