Coal comeback has Anglo’s Ndlovu smiling
While Anglo American might eventually sell it coal mines, for now that part of the miner's business is performing well. And July Ndlovu, CEO of Anlo American Coal South Africa, is optimistic.
when July Ndlovu was appointed CEO of Anglo American Coal South Africa, a division of the UK-listed group, the expectation was that his elevation to the 45 Main Street hierarchy would be a short-lived one. Months earlier, Anglo American CEO Mark Cutifani had outlined plans to radically restructure the company such that all its bulk mining assets – iron ore and coal – would be sold so that there could be a focus on platinum, copper and diamonds. This triggered a chain reaction of management changes, with Ndlovu moving from Anglo American Platinum, where he was head of processing, to replace Themba Mkhwanazi as
CEO of Anglo American Coal SA. Mkhwanazi in turn had replaced Norman Mbazima at Kumba Iron Ore. It was Mbazima’s new job to oversee the asset sales.
Ironically, no sooner had Cutifani unveiled the restructure, or the commodity market staged a remarkable comeback, coal and iron ore in particular. Where speculation thrived on the notion Kumba and the coal assets would be merged and controlled by the government’s Public Investment Corporation, there was now a new reality. Suddenly, Anglo was not the forced seller of old, cash-burning assets, and would manage its formerly non-core mines for cash unless a cracking offer was tabled.
Asked in an interview with finweek if he could foresee a time Anglo would eventually sell its coal mines, Ndlovu said – somewhat amused: “As a business unit CEO, quite honestly, I have to run the business as best as I can and make sure it’s the best thermal coal business on the globe.
“Anyway, a business is owned by somebody so I don’t get bogged down with whether Anglo will sell us or not. I’ve a role to develop the endowment that we’ve got in the most capitalefficient way. It generates cash, good returns,” he added.
That it does. Underlying pre-tax profit for Anglo American’s South African coal-mining division in the six months ended 30 June increased 73% to $283m owing to an attributable 46% increase in the export thermal coal price. Total export saleable volumes were in line with the first half of the previous financial year. Total trade production was 11.4m tonnes, representing a 3% decline as a result of the planned closure of the Eskom pit at Khwezela Colliery in Mpumalanga.
More broadly, Anglo Coal SA is removing Eskom sales out of its business completely once a R2.3bn sale to Seriti Resources, a black-owned consortium which has Mike Teke, Sandile Zungu and Anna Mokgokong as its leaders, is completed – a transaction that to some extent relies on Eskom getting its act together. The assets involved are sizeable: Anglo’s Eskom business, which consists of the New Denmark and Kriel mines (both in Mpumalanga) and the New Vaal mine (in the Free State), sold 24m tonnes in its 2016 financial year.
Eskom’s troubles with leadership are among the most well documented crises of modern-day South Africa, but Ndlovu thinks the executives currently fulfilling acting roles – such as its acting CEO, Johnny Dladla – won’t have much difficulty approving the deal since it merely requires the transfer of a sales contract. “That’s always going to be an issue,” said Ndlovu. “Having said that, there are people in acting positions, there’s an interim board; we work with them on the assumption that they have got the necessary mandates to act in the best interests of the organisation. We haven’t seen anything yet to suggest Eskom wouldn’t be able to make or get a decision.” Ndlovu thinks the deal will take its course; ultimately, it’s out of Anglo’s hands.
The same could be said of the coal price, but Ndlovu is fairly optimistic. In addition to the extreme weather conditions currently, which play into the hands of coal exporters able to opportunistically capitalise on shortages, there’s also an explosion of new markets, especially in Southeast Asia, notwithstanding the near global antipathy for coal-fired energy.
“Coal is on the comeback because of a number of factors, not just cutbacks in China but also the fact that we’re beginning to see new markets emerging in Southeast Asia, North Africa, the Middle East,” he said. “So you see South Korea and Taiwan building new power stations; in Pakistan there are new stations coming. It’s all beginning to support the price.” ■ email@example.com
July Ndlovu CEO of Anglo American Coal South Africa
Johnny Dladla Acting CEO at Eskom