Armando Torres: Oyu Tolgoi will lead the copper industry in 10 years now

Journalist A.Odontuya

2017-05-12 09:32 GMT+8

Newly appointed Chief Executive Officer of Oyu Tolgoi LLC Oyu Tolgoi LLC, Armando Torres held meetings with journalists on Apr 9. 

A Brazilian-born Armando Torres studied chemical and process engineering. He started his career in 1990 as a process engineer and was subsequently promoted to management positions at Alcoa in Latin America, Europe, and Western Australia. Previously, he was working for Rio Tinto Aluminium as a head of operations and Transformation Leader since Mar 2016 to a few weeks ago. 

At the beginning of the meeting, he stated that: "I am really happy for the Board of Directors and shareholders gave their trust and confidence on me to lead Oyu Tolgoi to the next level. 

"The first point that I would like to start is safety. Because the life and health of our employees are the most important value for me. I am pleased to share with you that our operations are running in terms of safety. The underground mine is achieving safety rates that is one of the best in the construction industry. We are performing very well in safety. However, there is a lot of efforts in training and educating the workforce and really with the strong leadership visibility. 

We made a choice to put national content as the first priority. 

In the people respect, we are continuing developing the national content. Because considering the sustainable long-term future as this mine is going to be here for a hundred years. It is fundamentally important to develop the local capability. In operations, we have around more than 96 percent of Mongolians while in the underground development 87 percent of our employees are Mongolian. We have seen a tremendous effort in the underground. Employees of underground development reached 3500 people in a very short period. We made a choice to put national content as the first priority. We require a lot of work in early stages to train and developing people. But as a long-term, we are going to have a feedback because we are going to have a highly capable workforce. 

One of my positive experience of Mongolia is not only the workforce, but everyone that I met in the country is capable and well educated. I think this is a strength that we need to take as our advantage to move us to be leading company in the copper industry. 

In terms of cash position, we will have a year that we need to work hard to be positive. Because of the part of our body that operating here now has a low copper and gold grades. But the operational team are working very hard to make us efficient and to have positive cash flow in 2017 and 2018. 

The first ore is expecting to be made in 2020 and we are on track to achieve that date.

In the local community area, the cooperation agreement is working well in terms of all engagements that you have. Several infrastructure projects have been completed or underway in Khanbogd region. We are working as well to move to the next stage of national procurement strategy. 

The underground development is running very well. We are heard of the plan in several fronts. Some fronts we are near to plan and we are committed to delivering underground on time, on budget and on cost. The first ore is expecting to be made in 2020 and we are on track to achieve that date". 

-What is your priority work to complete during your appointment as CEO of Oyu Tolgoi?
-I have had the experience to work with both sides which are mining and processing plant in several different countries. I am not here to lead the technical aspects. I am here to lead the people to succeed. I had experience with several commissioning of large expansions. OT is my fourth experience with major expansion. Commission of a major expansion is very important. First, it requires good design, good engineering, and good construction. But prepared people to operate with a new design with a large business. One of my experience that I have is to develop the people capability. That is one of major contribution that I can do to the business. 

-In the context of current economic difficulties that Mongolia is facing, the key ingredients to fix the problem is foreign investment. It was announced that 4.5 billion dollars will be invested for underground development. How much of this invested so far and how much will be spent in 2017?
-The project is 4.5 billion dollars, plus sustaining capital to sustain our business. We have a plan to spend this year between 800-900 billion dollars with the project. It is going to be around 1 billion dollars per year until 2020 to complete the development of the mine. We have a strong target to promote national content and the national procurement companies. Currently, we are ahead of the target to maximize the national companies to be a big part of the underground development. We have several examples like joint ventures between construction, cement supply and part of the infrastructure that we are doing. Our target is to achieve the schedule on time. Achieving the schedule on time is important due to the funds will come. In 2017, the inflow of money from the project is more than 100 percent than the revenues that OT have. Mongolian banks near 110 percent of the revenues that OT have and this is going to increase as the underground development goes.  

-Parliament resolution stated that sales revenues of major projects such as OT shall be transmitted through Mongolian banks. In doing so, MP Javkhlan said that 20-30 percent of the revenue wil stay in Mongolia. What is the position of OT on this resolution?
-I am just recent appointed and I can not answer regarding this clause. It is a shareholder issue or Government of Mongolian issue. 

One thing that I can state is last year 66 percent of our revenue inflows to the country. This year it will be increased to 110 percent. 

-Does Oyu Tolgoi work with Mongolian banks?
-We are ready to work with Mongolian banks. Currently, we are working with five Mongolian banks. Money flowing here is more than our revenues. As I said 110 percent of our revenues is flowing through the Mongolian banks. The banks that have the ability to borrow money to shareholders will be opened in the future. 

As I said 110 percent of our revenues is flowing through the Mongolian banks. 

We are recognized as the best taxpayer of 2016. We will continue to be one of the largest contributors for Mongolia in terms of the overall contribution. From 2010 up to now, we have contributed 6 billion dollars to the country in taxes, royalties, salaries and procurement. 

This base is going to be increased with the underground. So we are having a difficult economy in years. We separate open-pit to underground development. Because what is going to be important for us to look is the overall contribution of the open pit and underground together. 

-You said you will be focused on developing capabilities of people. What is your current assessment of the capability of Mongolian employees? 
-I am extremely embraced with a foundation that Mongolians have. I think the opportunity is the experience. We are here to bring knowledge and build up experience in short period.

I have studied many manufacturing systems in my life. The one manufacturing system that I liked the most is the Toyota manufacturing system. It is the most comprehensive where you engage people to achieve outstanding results. When I see our employees, I can see that we can be there. I do not have doubt to that we will be leading the copper industry in 10 years now. Thus, we need to work hard for that.

-Thank you. 

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