The end of An­glo?

Ham­mered by plum­met­ing com­mod­ity prices, the once-mighty min­ing group is sell­ing most of its lo­cal as­sets as part of a last-ditch res­cue ef­fort

CityPress - - Busi­ness - DE­WALD VAN RENS­BURG and JAN DE LANGE busi­ness@city­press.co.za π

An­glo Amer­i­can, once the sprawl­ing con­glom­er­ate at the heart of South Africa’s for­mal econ­omy, is set to evis­cer­ate it­self. By sell­ing or clos­ing most of its mines, and re­duc­ing its staff world­wide to a mere 50 000, the group in­tends to largely with­draw from its birth­place and be­come a far more mod­est Aus­tralian-South Amer­i­can min­ing group by 2018.

CEO Mark Cu­ti­fani an­nounced the new plan this week fol­low­ing the as­ton­ish­ing plum­met of An­glo’s share price this year.

Prices for vir­tu­ally ev­ery­thing An­glo and its sub­sidiaries pro­duce have plum­meted, leav­ing the group with an in­creas­ingly oner­ous debt prob­lem.

The res­cue plan re­volves around re­tain­ing only so-called pri­or­ity one as­sets.

In the process, it will re­duce its mines from 55 to 20 and cut its work­force, which was 162 000 in 2013, to 50 000 by 2018.

Of the cur­rent mines, 26 are in South Africa. Of the cur­rent work­force 72 000 are in South Africa.

The list of pri­or­ity one as­sets is short and telling for what did not make the cut.

Most of the group’s South African as­sets, which cur­rently still ac­count for the largest chunk of An­glo’s work­force and book value, are ab­sent.

Not even Mi­nas-Rio, the iron ore mine in Brazil An­glo has spent $15 bil­lion (R238 bil­lion) it can’t af­ford build­ing, is on the list.

Nei­ther is Sishen, South Africa’s ma­jor iron ore mine owned through Kumba Iron Ore. Sishen is, in fact, tar­geted for a re­struc­tur­ing un­der the new plan.

An­glo Coal, con­sist­ing of 10 mines pro­duc­ing about a fifth of South Africa’s ther­mal coal, also seems des­tined for di­vest­ment. As a ma­jor Eskom sup­plier, any pos­si­ble sale is sure to get em­broiled in pol­i­tics.

The group’s plat­inum mines in Rusten­burg are due to be sold to Sibanye Gold in terms of an ear­lier deal that had al­ready been an­nounced.

De Beers, which is 85% owned by An­glo, sold its last as­set in Kim­ber­ley ear­lier this month.

The lo­cal mines that do qual­ify as pri­or­ity one as­sets cer­tainly in­clude Mo­galak­wena, An­glo Amer­i­can Plat­inum’s gi­ant mech­a­nised plat­inum mine in Lim­popo, as well as De Beers’ Vene­tia di­a­mond mine, also in Lim­popo.

“Mines we can’t sell and which can­not make a profit will be closed,” Cu­ti­fani told an­a­lysts and as­set man­agers at a pre­sen­ta­tion on Tues­day.

The hard­line at­ti­tude did not do An­glo’s share price any favours as the com­pany

(% OF TO­TAL)

60

50

40

30

20

10

1986

1990 1991-05 19962000 An­gloGold now in­de­pen­dently listed π An­glo Amer­i­can Plat­inum about to sell most as­sets to Sibanye Gold π An­glo Coal (100%) π Black Moun­tain, Na­makwa and

Gams­berg Zinc (went to Exxaro) π Scaw Me­tals now owned

by the IDC π Highveld Steel now owned

by Evraz π Mondi now in­de­pen­dently listed π Boart Longyear, a global leader

in mine drilling (got sold) π LTA Limited, a con­struc­tion com­pany that is now part of Aveng Gri­naker-LTA π AECI, the min­ing ex­plo­sives com­pany, bought its own share back from An­glo in the 2000s π Ton­gaat-Hulett, in­clud­ing

Hu­lamin π Colum­bus Stain­less Steel π De Beers π Pal­ab­ora Min­ing π Sa­man­cor π FirstRand π SA Ea­gle In­surance 2001

03

2004 tum­bled an­other 10.7% on the day. It has sub­se­quently sta­bilised slightly at R71.14 a share – 64% less than at the be­gin­ning of this year.

At the pre­sen­ta­tion on Tues­day, Rene Kley­weg from Deutsche Bank ac­cused Cu­ti­fani and his man­age­ment at An­glo of tak­ing far too long to an­nounce the rad­i­cal re­struc­tur­ing.

“We all make mis­takes and my mis­take was to main­tain a rec­om­men­da­tion to buy on your shares. How many of the steps you’ve an­nounced here do you wish you had an­nounced 18 months ago?” Kley­weg grilled Cu­ti­fani.

Cu­ti­fani de­fended him­self, say­ing very few peo­ple could pos­si­bly have pre­dicted what has hap­pened to com­mod­ity prices this year.

2005

2006

2007

2009

2010

2011

2012

2013

2014 π An­glo Plat­inum (soon to sell large part of its as­sets to Sibanye Gold) π An­glo Coal π De Beers

π Sa­man­cor

π Kumba Iron Ore

“Our plan to move faster is nat­u­rally a con­se­quence of where the prices are sit­ting to­day,” he said.

The prices An­glo and its sub­sidiaries re­ceive fell by an av­er­age of 25% this year – off al­ready low bases.

The col­lapse of com­mod­ity prices is also ham­mer­ing other min­ing gi­ants, in­clud­ing Glen­core, which an­nounced its own new sur­vival plans this week.

While the ma­jor­ity of An­glo’s re­main­ing em­ploy­ees will most likely get trans­ferred as mines are sold, re­trench­ments are also likely – so much so that the de­part­ment of min­eral re­sources this week once again “sum­moned” the com­pany to Pre­to­ria to ex­plain how it in­tends to not cause an eco­nomic catas­tro­phe.

The de­part­ment did the same thing back in 2013 when An­glo Plat­inum first an­nounced plans for a ma­jor down­siz­ing at its Rusten­burg mines. At the time, the move was widely crit­i­cised by busi­ness groups as po­lit­i­cal med­dling.

Last gasp

The new su­per-re­struc­tur­ing an­nounced this week marks the fi­nal phase of An­glo’s de­vo­lu­tion over the past two decades.

Once con­sid­ered not only South Africa’s, but the world’s largest min­er­als group, An­glo has been dis­man­tling it­self for years.

An­glo’s his­tory re­ally starts with Ce­cil John Rhodes’ mo­nop­o­li­sa­tion of the then new di­a­mond mines of South Africa in the 1880s. The re­sult was De Beers. Separately, Ernest Op­pen­heimer founded the An­glo Amer­i­can Cor­po­ra­tion in 1917 with the ex­press pur­pose of buy­ing up and ex­ploit­ing the east rand of Jo­han­nes­burg’s gold de­posits.

By 1924 An­glo and De Beers were share­hold­ers in each other, cre­at­ing the ca­bal­like “pyra­mid” struc­tures that would char­ac­terise ma­jor South African cor­po­ra­tions up to the 1990s.

In 1986 An­glo di­rectly and in­di­rectly con­trolled 54% of the JSE’s value, ac­cord­ing to the method­ol­ogy of McGre­gor’s Who Owns Whom, which in­cludes ef­fec­tive con­trol be­yond di­rect own­er­ship. Back then, An­glo con­sisted of a net­work of about 180 sub­sidiaries and as­so­ciate com­pa­nies in South Africa and abroad.

By 2006 An­glo’s con­trol of the JSE had dropped to 21%. To­day it is more like 5.5% and af­ter the planned ra­tio­nal­i­sa­tion, it may very well be neg­li­gi­ble.

In 2006 Cyn­thia Car­roll be­came the first non-South African to run An­glo since Op­pen­heimer him­self, who was Ger­man and came to South Africa in 1902 as a pro­fes­sional di­a­mond buyer.

An­glo was over­taken as the world’s largest min­ing com­pany in 2001 by BHP Bil­li­ton, which was then a re­cent cre­ation of the other South African oli­garchic fam­ily, the Ru­perts.

The Op­pen­heimers started tak­ing a back seat in the early 2000s as An­glo steadily di­vested “non-core” as­sets, but also its en­tire stake in An­gloGold.

Back in 1999, the first year af­ter mov­ing its head­quar­ters to Lon­don, the group still owned a sprawl­ing em­pire in and out of the min­ing in­dus­try.

This was the legacy of apartheid-era eco­nomic iso­la­tion that saw the rise of mas­sive con­glom­er­ates based in min­ing in­vest­ments buy­ing more as­sets in­side the coun­try.

In 1999 gold was still An­glo Amer­i­can’s ma­jor money-spin­ner and the group owned a large swathe of the lo­cal steel, sugar and pa­per in­dus­tries, not to men­tion 20% of bank­ing group FirstRand.

To­day its pres­ence in South Africa is still large, with con­trol­ling stakes in An­glo Plat­inum, An­glo Coal, Kumba Iron Ore and Sa­man­cor.

PHOTO: HER­MAN VER­WEY

A PLACE IN

THE SUN A man walks over rail­way

tracks at sun­rise, with one of the mines of Marikana,

near Rusten­burg,

in the back­ground.

An­glo Amer­i­can an­nounced this week that

it would re­duce its work­force world­wide to 50 000 by

2018

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