Geoff Candy of Mineweb reports that in his first speech as CEO of Anglo American, Mark Cutifani lays out a number of the challenges facing his new charge and the rest of the mining sector. As Candy says, “Cutifani, is not known for pulling his punches. And, his first speech as Anglo American CEO was no different.” Speaking at the group’s Annual General Meeting, he told Anglo American shareholders that with the group’s share price languishing compared to its peers, business as usual was no longer acceptable. “As a major diversified company, we need a more focused articulation of the value proposition that will guide our strategic positioning,” Cutifani said, before adding that Anglo American (and the rest of the sector) need to look beyond the mining industry for inspiration.

“To be brutally frank, our industry lags the petroleum, manufacturing and aviation sectors and other more progressive and innovative heavy industry players in terms of operating practices – there is no reason why our industry should not use the best from all of these ‘restless innovators’.”

Indeed, Cutifani said, ” over the last five years, the sector has been guilty of “a lack of capital discipline, a lack of focus on returns and incapacity to translate good intent into business results.”

But, he added, while “there has been considerable media commentary on strategy in our industry recently, with new chief executives promising not to make acquisitions, not to develop new projects and to return cash to shareholders in ever increasing amounts. I will not make promises where I am not sure we can consistently deliver value or where we do not have an execution strategy.”

One of the major reasons for this lack of discipline, Cutifani told shareholders, is that the sector has lost sight of what the obvious issues are.

To this end, when appraising new business opportunities, be they M&A or new projects, Anglo American is going to approach the decision based on three criteria:

• “Is it the best place to commit that capital compared to all other options?

• Is there enough information to be confident we have got the numbers right and that we have fully appraised the risks and the opportunities? and

• Does the group have the team that can execute in line with the plan?”

Adding, “While it should go without saying, we will again reinforce the notion that all investments must more than compete with the natural alternative; that is, to return cash to shareholders. That simply demands that our individual and portfolio focus must be on delivering returns well in excess of our weighted average cost of capital.”

For Cutifnai, the crucial thing is to ensure that the “money goes to the right place.”

To this end, not only is the group going to engage, over the next three months in a detailed strategic review, it will also be considering “a different capital model that takes more cognisance of individual capital risk, more like the approach that the petroleum industry takes towards the syndication of capital.”

Cutifani explained that this meant the miner would be more open to joint ventures, where it can “partner with others to tap broader operating or other experiences along with lowering our incremental capital risk on specific projects.”

He plans to also refocus the group on technical innovation, “where the application of “intellectual capital” drives the creation of longer term competitive advantage”.

Like his predecessor, Cynthia Carroll, Cutifani was at pains to stress the importance of safety and community development and said that the group will keep people at its core.

But, he added, “Making sure we have the right people in the right roles doing the right work and that everyone understands what they are individually accountable to deliver. This is a cornerstone in delivering continuous improvement and shareholder value.”