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.