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
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)
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
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.
2014 π Anglo Platinum (soon to sell large part of its assets to Sibanye Gold) π Anglo Coal π De Beers
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.
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.
A PLACE IN
THE SUN A man walks over railway
tracks at sunrise, with one of the mines of Marikana,
in the background.
Anglo American announced this week that
it would reduce its workforce worldwide to 50 000 by