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.

Finweek English Edition - - Contents - By David McKay

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.” ■ ed­i­to­rial@fin­

July Ndlovu CEO of An­glo Amer­i­can Coal South Africa

Johnny Dladla Act­ing CEO at Eskom

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