Groundswell of change, but still work to do
• ‘We’re starting 2018 on a much more positive note’
Anglo American SA deputy chair Norman Mbazima has a desktop sculpture in his office he received last year from a supplier to celebrate the mining giant’s centenary.
The sculpture depicts a bull and bear embraced in the ageold tussle reflecting the varying fortunes in equity and commodity markets.
The artwork’s novelty lies in that the figurines are not fixed to the baseplate and Mbazima can easily swap the bull to dominate the bear, or vice versa.
Speaking to him in mid January, the bull was clearly in the ascendancy. A year ago, if he’d had this corporate artwork to distract him, the figurines might have been laid side-byside. And a year prior to that, there is no doubt the bear would have had the bull firmly pinned to the ground.
Should he have chosen to mirror market conditions in this manner, the frequency at which he’d have to change the composition of the figurines would have been frightening. Mining, after all, is an industry used to longer term up and down cycles.
“It was only at the end of 2016 that we started to seen an uptick in commodity prices,” he says. “In the meantime we all started doing restructuring and efficiency drives, looking at portfolios and so on. That is largely done for us now, and therefore we’re starting 2018 on a much more positive note.”
He is not alone in his optimism, and justifiably so.
On the global stage, commodity prices have continued the strong recovery last year, with stellar growth, in particular, in the prices of palladium, iron ore and zinc.
More importantly, on the domestic front, Cyril Ramaphosa’s victory to lead the ANC and his pro-business stance have set the year off to a rollicking start.
“Generally, we’re looking good as an industry and where we’re going,” Mbazima assures. “I’d hope that the optimism can convert into ore coming out of the ground, which means investment, and bigger and refurbished mines.
“Obviously our investment climate has not been the best in the recent past, and we’d like to see that changing. It is only just starting.”
This rosier outlook is echoed by industry participants and analysts alike, although seldom without the rider that it’s “cautious optimism”.
Sibanye-Stillwater CEO Neal Froneman is quick to point out this is understandable given that we’re still caught up in the euphoria brought about by the honeymoon phase of Ramaphosa’s victory. The changes and talk of a more market-friendly approach are certainly welcome, he says, but much depends on the talk being backed up by action.
“I’ve been extremely negative about the direction of SA, but I’m quietly optimistic amid the groundswell of change we’ve seen. That bodes well for us, but we still have a lot of work to do,” he says.
The year ahead for him and his team, however, will be one of consolidation and bedding down the sizeable acquisitions made in 2017. Most significant of these was the all cash buyout of US platinum group metals (PGM) producer Stillwater, and then the announcement late in the year of its bid for platinum miner Lonmin.
Last year may have been the company’s busiest, but it follows nearly five years of seemingly frenetic activity that has seen it conclude eight deals in gold and PGMs worth more than R45bn.
“From a corporate action point of view, we had an extremely busy year. This has resulted in us acquiring assets that were intimately part of our PGM strategy. There is still quite a lot of work to do to close the Lonmin transaction, and we expect that to be another six-month process.
“We are going to have a fairly quiet 2018. The market probably needs a bit of stability to see how these individual assets perform. They need to see their cash flows and stability in terms of issuance of shares and capital raising. It creates so much noise and once-off accounting issues and I have a great need for the market to see the quality of these assets,” says Mbazima.
That job will undoubtedly be made a little easier by current market prices, which are broadly expected to remain buoyant. Combined with a more accommodating local environment, this might just be the fillip the industry needs to start off the new year.
And welcome it would be given the rift that developed last year between miners and government. It will also fill the conversations at this year’s Mining Indaba with a little more hope, and a renewed sense that the local industry will be given the opportunity to thrive.
For Mbazima, the year would certainly be considered a success if he’s able to leave his prized sculpture untouched and unturned by the vagaries of the local or global economies.
THE YEAR AHEAD WILL BE ONE OF CONSOLIDATION AND BEDDING DOWN THE SIZEABLE ACQUISITIONS MADE IN 2017