Three leading mining industry executives told Andrea Hotter
about their responses to the 2008-09 global financial crisis,
and what advice they might give their peers today.
They say that hindsight is 20/20, and for the metals and
mining industry, this was particularly true of the 2008-09
global financial crisis.
Anglo American chief executive officer Cynthia Carroll,
who joined the company at the start of 2007, had spent her
inaugural months working to improve the miner’s
safety record and optimize its assets. "The board recruited
me as a change agent," she recalled. Safety of the
company’s mining operations was a key area for
her attention and one in which the company achieved major
improvements under her leadership. "Anglo also wanted to add
more iron ore to its commodity base, and fundamentally uplift
its performance," she added.
The new approach was working. The London-listed
diversified miner reported record earnings and operating
profits for the first half of 2008 and had an approved
project pipeline of $15 billion. By the summer of 2008,
commodities prices were at record highs in the midst of a
super-cycle boom. China, the engine of growth for the
commodities sector, was on track to see another year of
double-digit gross domestic product growth.
"China looked as though there was no stopping it in terms
of growth and development; infrastructure investment was
booming, as was demand for commodities across the board
– iron ore, coal, copper, nickel, even platinum
group metals. We thought demand was just going to keep
charging ahead – there was no end in sight, starting
with China," said Carroll.
But then on September 15, 2008, the United
States’ fourth-largest investment bank Lehman
Brothers filed for bankruptcy protection. It was, as Carroll
noted, a "big wake-up call."
Looking back, the warning signs were there. Financial
institutions had been marketing mortgage-backed securities
and sophisticated derivative products at unprecedented
levels, but when the real estate market collapsed in 2007,
these securities slumped in value. A credit crisis began
unfolding and, in March 2008, Bear Stearns
Even then, the crisis initially seemed to be related to
toxic mortgage lending in the United States and not the
broader global macroeconomic economy.
"The crisis was really something that was seen first and
foremost in the financial markets. There were various
financial instruments that were being discussed, I remember
learning the new acronyms very quickly!" said Tom Albanese,
who headed up mining company Rio Tinto for six years from
2007 to 2013. "The financial crisis was led by those
financial markets as a leading indicator, and the mining
sector was more of a lagging indicator," he added.
There were nonetheless some signs of the impact. For
example, Albanese recalled noticing a severe contraction in
construction activity in London, where Rio Tinto was
headquartered. "I remember coming in one Monday morning and
from my office I could see about 14 buildings under
construction, and that day, every single crane was stopped.
You knew that something bad was happening, but you got a
full, in your face, sense of what the extent was," he said.
"It probably took another month or two before it plugged into
the physical [metals] markets."
The contagion quickly spread to other economies around the
world, most notably in Europe. By the end of the year, the
prices of aluminium, coal and iron ore had more than halved;
in the case of copper, a leading economic indicator due to
its use in housing and construction, the market had collapsed
from above $8,700 per tonne to $2,900 per tonne.
It was the classic Black Swan event that mining executives,
like most of the rest of the world, simply did not see
coming. It also made it impossible to know when and how the
situation might end.
"Everyone was second-guessing," Albanese said. "You heard
the terms 'green shoots’,
'L-shaped’ recovery, and then how long would it
take – would it take two years, five years? Even,
would the economy ever recover? Because some people were
saying it would never recover."
So, when he was asked for his view of a future recovery on
February 14, 2009, also known as Saint
Valentine’s Day, Albanese suggested that the
markets would see a "LUV-shaped" recovery!
"I said, 'I think it’s going to be an
L-shaped recovery in Europe, a U-shaped recovery in the
United States and a V-shaped recovery in China.’
[My answer] was tipped for the Valentine’s Day
spirit but that’s actually how it played out,"
Without absolute certainty of how the 2008-09 downturn
might turn out, mining executives set about scenario-planning
for various outcomes.
"Nobody knows how a crisis will play out and how long a
time it will last. For us it was about trying to develop
scenarios," said Svein Richard Brandtzæg, CEO of
Norwegian aluminium producer Norsk Hydro for a decade from
January 2009. 'We knew at that time we could extrapolate
trends and try to build on history, so it was about looking
at how bad could it be and how could we manage that, even in
different, really bad scenarios," he added.
Companies and their management teams sprang into action.
Some set up specific names for their initiatives, some did
not; but the common thread was that measures undertaken
across corporations was very similar.
Norsk Hydro commenced a three-part programme called Agenda
2010, centered on navigating the storm, staying focused,
and shaping the future. Anglo American created One Anglo,
designed to bring the company together and continue to drive
the work that Carroll and her team had already been
undertaking. Rio Tinto, which had already undertaken a One
Rio Tinto programme before the crisis hit, continued its
value creation strategy with a focus on strengthening the
business during the downturn.
"We [at Anglo American] were preparing for all
eventualities and we were thinking about multiple scenarios.
I knew that we would be in a much better place because of the
work that we had done over the first two years, but we
couldn’t stop," Carroll reflected.
As CEOs set about leading their companies through
the global financial crisis, they faced challenges on
multiple fronts. Managing their assets was a key test, and in
particular deciding whether or not to curtail capacity as
commodities prices fell and demand in key consuming
industries was crimped.
"You have to go through the difficult task of determining
how many of your operations should be running in this market:
Where do they sit on the cost curve, what is the cost of
shutdown, what is the cost of reopening, what are the other
considerations that take place in that?" Albanese said.
Rio Tinto cut a substantial amount of its aluminium
smelting capacity as well as rolled back iron ore shipments
and production capacity at various operations around the
According to Albanese, curtailment decisions are initially
made based on the cost structure of assets and whether they
are making money. "If the operation is making cash, how can
you basically keep the costs down so that it preserves itself
in case things get worse? But if the asset is not making cash
flow, then you really have to think, what are your options?"
It is a view echoed by Carroll, who noted that Anglo
American cut or stopped really high-cost production,
particularly in platinum and coal. "Every production unit,
whether it was an ounce, a tonne or a carat, we analyzed. It
had to be profitable or become profitable in the very short
term," she said.
"We created visibility of our cost positions across the
group so everybody knew where they were positioned on the
cost curve, everybody knew that they had support to get to a
better position, and we gave them the tools and support to
help them to get there," she added.
But miners and processors considering production cuts
cannot ignore safety or care and maintenance, including of
associated asset infrastructure, Carroll cautioned.
Some operations are easier to move into care and
maintenance than others, with the cost of idling an
energy-intensive aluminium smelter being much higher.
Typically, decisions to cut aluminium smelting capacity are
not taken unless the cuts are slated to last for at least a
"If an aluminium smelter cut is shorter than that [a
year], you’d probably think, 'well, let us keep
that capacity running.’ It is very much about
how you believe the crisis will play out... If you think the
crisis will take a long time, you take out capacity,"
Brandtzæg said. "But that capacity will be out for a
while and it will cost a lot of money to bring it back again.
In that respect you try to keep capacity going to see if the
crisis will pass and things will improve," he added.
'Take or pay’ power contracts can also be
prohibitive to cuts due to the cost associated with idling
capacity while still having to pay for the high level of
energy that smelters use.
Eventually, however, producers tend to look at their peers
and see whether curtailments can be postponed because someone
else will make them instead. "At some point in time there is
a bit of gaming theory – whose is the first
production to go to support the supply/demand picture in a
lower demand environment," Albanese said. "But for the most
part, it wasn’t like you see in retail and other
industries, where you’re always worried about
competitors. First and foremost, you’re focusing
on what your operations are actually doing and whether they
are sustainable in [difficult] kinds of markets or not,"
Mining CEOs had to make some difficult decisions
quickly in an effort to create the resilience for what might
lie ahead. One of those tough decisions was what to do about
Anglo American was faced with the choice of either cutting
all its capital expenditure and retaining its dividend or
continuing to invest in select projects that would deliver
substantial value on the short- to medium-term and suspending
"After a lot of deliberation, we decided to suspend our
dividend," Carroll said. "We cut 50% of our capex, and we
suspended our final dividend, focusing on cash preservation
and safeguarding the balance sheet. I can tell you, this is a
terrible thing to have to do – it was a tough choice
and decision to make," she added.
The move was unpopular with a couple of the
company’s more vocal shareholders, but Carroll
noted that Anglo American was not alone in cutting its
dividend and did not undertake rights issues as many of its
The company restored the dividend the following year as
the balance sheet was strengthened; the projects it had been
supporting delivered about $800 million in cash about two
years later. Anglo American reported profit of $2.4 billion
in 2009 and $6.5 billion in 2010. "Investors were very
pleased about that performance," Carroll said.
At the same time, miners set about working to improve
productivity with a focus on improving efficiency and pushing
assets further down the cost curve. These initiatives were
aimed at preserving value for shareholders by conserving cash
flow and reducing levels of debt.
Brandztæg noted that a central tenet of Norsk
Hydro’s Agenda 2010 programme was to change the
company’s mindset away from focusing on
long-term profitability towards focusing on short-term cash
preservation. "It was about releasing working capital and
cutting costs as much as we could," he added.
Just as some facets within mining and metals get prioritized
during a downturn, others get put on the backburner.
Exploration budgets typically fall victim to being slashed
during tough times as mining companies seek to preserve cash.
It all too often means that some metals are faced with a
dearth of projects for years to come as pipelines thin and
junior exploration firms – typically the source of
new future assets for bigger producers – are unable
"Unfortunately, it’s always the case that the
first thing to go is always exploration. You stop thinking
about what your portfolio looks like 5-10 years from now and
think about how you get through the next 90 days," Albanese
And while research and development (R&D) is often also
a casualty of belt-tightening measures, it can pay to keep
this intact. "The real 'no regret’ I have is
that we actually kept automation going in Western Australia,
developing our Mine of the Future™ technology and
innovation project. That was a benefit as we went forward,"
The project started as one of the world’s
biggest private sector trials of robotics, comprising a fleet
of mining equipment that loaded and hauled ore automatically.
The system eventually revolutionized productivity and the way
mining is conducted, creating one integrated mining
processing and logistics system controlled by operators
almost 1,000 miles away.
"In 2008, people were referring to the Mine of the
Future™ as being like Star Wars, and not as a
compliment but in a derogatory nature! But it moved very
quickly from something that one or two companies were doing
to something that will become as uniform for the industry and
every company as looking at an iPad or a computer," Albanese
It was a similar story at Norsk Hydro, whose R&D
activities fell into the "shaping the future" category of its
Agenda 2010 programme. "We know from previous serious crises
that innovation is sometimes accelerated – that is
what we have seen during world wars but also during crises,"
"There can be opportunities in a crisis. Norsk Hydro
emphasized R&D during the 2008-09 global financial crisis
because it knew it could make additional efforts and deliver
even better innovation through R&D," he added.
He cited the energy-efficient aluminium production
technology being used at a pilot plant at Karmøy in
Norway as a good example of the value of continuing R&D
even during tough market conditions. The pilot plant started
operations in January 2018 and has exceptionally advanced
climate- and energy-efficient aluminium production
technology. The facility, located at Hydro’s
existing aluminium plant at Karmøy, will add 75,000
tonnes of aluminium production per year to the existing
capacity of around 200,000 tpy. The technology developed by
Hydro’s researchers will substantially reduce
energy consumption in aluminium production.
Mergers and acquisitions
The 2008-09 crisis also presented another inevitable
opportunity for mining executives: growth in mergers and
acquisitions as mining companies re-evaluated their
portfolios and sought to divest non-core assets.
Some were on the receiving end of approaches, like Anglo
American, which rebuffed a merger offer from industry peer
Xstrata plc. The deal did not gain any momentum with Anglo
American’s shareholders, something that Carroll
attributed to the fact that it was not viewed by the
company’s board or its stakeholders to be the
merger of equals that it was being portrayed as.
"It was not a merger of equals. It was June 2009, we had
much more valuable assets and a commodity portfolio that
stretched across bulks, base and precious metals," Carroll
recalled. "We pushed back very hard to say, 'this is not a
merger of equals,’ and we certainly demonstrated
that we were in a very strong position," she said. Xstrata
eventually dropped the proposed deal four months later, ahead
of a former 'put-up-or-shut-up’ deadline imposed
by the United Kingdom’s Takeover Panel.
Other miners made approaches that did result in deals,
like Norsk Hydro’s purchase of the aluminium
business of Brazilian miner Vale.
"As I said, in such a crisis situation there will always
be opportunities!" Brandtzæg laughed. Negotiating
directly with Roger Agnelli, then Vale CEO, the pair were
already finalizing the details by the start of April 2010,
signing the deal a few weeks later. "It was very much about
securing raw materials for our aluminium production, which
had been an issue for the company for several decades," he
It is sometimes said that real leaders are not born
– they are made, and very often forged in crisis.
The need to be seen, to communicate and to act as a motivator
became particularly clear to mining management during the
"In many ways, the CEO has to be a bit of a cheerleader;
keep the teams motivated, encouraged, focused on what they
need to do as part of the solution. You have the CEO and the
executive team, but you also have an organization with tens
of thousands of people, who are also wondering what this
means – for their job, for family members that might
have job losses," Albanese said.
"From a CEO perspective, first and foremost
you’ve got to get out there, you’ve
got to communicate better, you’ve got to
encourage the organization to stay focused, so you have the
ability to react, respond and reposition," he added.
Carroll agreed, noting that CEOs have to keep connected
with their entire organization and not just the management.
"You have to keep engaging, you have to be inclusive, and
while maintaining the momentum, drive, focus, encouragement
and the pace," she said.
Failure to communicate with stakeholders, internally as
well as externally, can be very isolating.
"I am observing today a lot of CEOs and business unit
heads acting in silos and that’s not the thing
to do," Carroll noted. "CEOs should be having dialogue with a
range of participants in the industry as well as those
outside, in nearby jurisdictions, to learn what
they’re doing and, in some cases, solve problems
The 2008-09 downturn was a financial crisis; just over a
decade on, the mining industry is facing a devastating health
crisis in the Covid-19 pandemic.
While both crises severely impacted the sector, the big
difference in 2020 is that, in addition to the crash in
demand amid a broader economic downturn, the metals and
mining industry is also currently facing a supply shock while
miners curtail production and rein in project
Prices began the pandemic nowhere near super-cycle highs,
and markets had already been grappling with trade wars,
broader economic uncertainty and the prospect of slowing
The current reduction in supply, which previously may have
given metals prices a boost, is now being met with a big hit
to demand. How that supply/demand balance evolves is unlikely
to be clear until the dust settles, and the coronavirus is
fully under control.
"The mining industry did not drastically change the way it
did business after 2008; we thought about preparing ourselves
in a much more diligent way but returning to work today will
be very different. We need extreme and additional controls in
terms of screening, testing, increased sanitation, social
distancing – this is a fundamental change that is
not going to go away," Carroll said.
"The Covid-19 crisis will clearly be alleviated once a
vaccine is developed and distributed, but even economic
stimuli will not have a huge impact until that happens. The
economic recovery period in this case will take years and
years," she added.
Near- or re-shoring is, meanwhile, likely, as companies
seek to diversify their supply chains, while digitalization
is likely to accelerate further, the executives
At the same time, the volatility created by crises like
Covid-19 is adding a layer of uncertainty to the development
of large-scale projects that take a decade or more to
progress and are highly capital intensive. This means that
mining projects are likely to be developed over time in
phases instead of over longer periods with less visibility,
"We’ll hear more and more about phasing
operations rather than starting with the biggest thing that
can be envisaged; starting smaller and progressing the
project. The trend towards phasing projects from a more
modest start and then giving yourself time to develop it, not
only is it capital friendly, but it’s actually
more resilient in this market," he added.
If a crisis teaches anything, it is that companies should
be ready to expect the unexpected. "We sometimes feel very
surprised when there is a crisis, but when we look back in
history there have always been crises, and you never know
when they are coming. There will be Black Swan events in the
future, but we have learnt through crises that companies need
to have a decent financial situation and an inherent
flexibility to use when a crisis hits," Brandtzæg
"Most of all, this is about organization capability
– to be able to develop organizational competence
and capability to handle such a crisis will be crucial for
Tom is the former Chief Executive of Vedanta (2014-2017)
and Rio Tinto between 2007 and 2013. He has about 40 years of
industry experience and is presently on the boards of Franco
Nevada, a precious metals royalty and streaming company, and
Nevada Copper, which owns 100% interest in the Pumpkin Hollow
Copper development property in Nevada. In addition, Tom is an
advisor for a number of other businesses.
For the period of 2009-2015, Tom served on the Board of
Visitors of the Fuqua School of Business in Duke University.
Tom also served as the co-Chair of the Confederation of
Indian Industry National Committee on Mining from 2016-17.
Tom was conferred with the Mining Foundation of the Southwest
2009 American Mining Hall of Fame Award.
Tom holds a Bachelor’s Degree in mineral
economics and a Master’s in mining engineering,
both from the University of Alaska.
Cynthia Carroll has spent most of her career leading
global businesses in the industrial sector. Cynthia began her
career as an exploration geologist at Amoco Production
Company in Denver, Colorado before joining Alcan Aluminum
Corporation. She held various executive roles at the company,
including President of Bauxite, Alumina and Specialty
Chemicals and Chief Executive Officer of the Primary Metal
Group, Alcan’s core business.
From 2007 to 2013, Cynthia served as the Chief Executive
Officer of Anglo American plc. At the time, Anglo American
was one of the largest and most diversified mining companies
in the world, employing approximately 160,000 people with
operations on 6 continents and a market capitalization of
approximately $40 billion. Anglo American ranked in the top
20 companies on the London Stock Exchange’s FTSE
Cynthia sits on the boards of Hitachi Ltd, American
Securities, and Prince (an American Securities company). She
previously chaired the boards of Anglo American Platinum Ltd,
De Beers Société Anonyme, and Vedanta Resources
Holdings Ltd. and has also served on the boards of BP, the
International Council on Mining and Metals, the International
Aluminium Institute, The American Aluminum Association and
the Sara Lee Corporation. She is a fellow of the Royal
Academy of Engineers and a Fellow of the Institute of
Materials, Minerals and Mining.
Cynthia holds a Bachelor’s degree in geology
from Skidmore College, New York, a Master’s
degree in geology from the University of Kansas, and a
Master’s in business administration (MBA) from
Harvard University. She has also been awarded an Honorary
Doctorate of Science from the University of Exeter, Honorary
Doctorate of Laws from Skidmore College and an Honorary
Doctorate of Economics from the University of Limerick. In
2008, Forbes magazine ranked Cynthia the fifth most powerful
woman in the world; in 2009, Forbes ranked her the fourth
most powerful woman in the world. She is the only woman to
have held a CEO position of a major mining company. Cynthia
and her husband have four children, ranging in age from 20 to
Cynthia Carroll’s key points for a
CEO facing crisis situations:
Focus on people; avoid isolation.
Seize the opportunity the crisis brings.
Be flexible, agile and think about different operating
models, scenarios, optionality.
Be responsive and courageous.
Lead from the front; be inspirational.
Keep costs variable, so they are adjusted in line with
the market context as opposed to a disruptive
restructuring every time there is a setback.
Take risk and do things you never thought were
Rethink where we are and how we’re going
to do business. Start planning the future off the new
Align stakeholders accordingly. Work really closely
with them to get them on board and to understand what the
Keep connected with the entire organization. You have
to keep engaging, you have to be inclusive, while
maintaining the momentum, drive, focus, encouragement and
Svein Richard Brandtzæg
Svein Richard Brandtzæg is currently
Chairman of the Board of Directors of Veidekke ASA
From 2009 until 2019, he was President & CEO
of Norsk Hydro ASA (Norway), a global integrated energy and
aluminium company with 36,000 employees in 40 countries. He
previously held various positions at the company between 1985
and 2009, including President of Hydro Magnesium, President
of Metal Products, President of Rolled Products, and
Executive Vice President of Aluminium
Besides his current role at Veidekke ASA, he is a
member of the Board of Directors of Eramet and Sibelco, since
2019, and recently accepted membership of the Board of
Directors of Schmolz + Bickenbach.
Svein Richard Brandtzæg holds a Master of
Science degree in materials and chemical engineering of the
Norwegian University of Science and Technology/NTNU in
Trondheim, where he also obtained his PhD degree at the
Institute of Inorganic Chemistry. Dr Brandtzæg also
graduated from a foundation program in economy at the
Norwegian Business School. Between 1998 and 2006 he attended
several executive education programs at IMD, Harvard Business
School and the Wharton and International Forum. He was a
member of the European Roundtable of Industrialists from 2009
to 2019 and the Norwegian representative of the Bilderberg
Meetings from 2010 to 2019.