AngloGold’s ‘Mr Fixer’ to give group global edge
Possible divestment of SA operations could be on CEO Kelvin Dushnisky’s to-do list
● Canada-born Kelvin Dushnisky will relocate to Johannesburg next month to head the world’s third-biggest gold miner, AngloGold Ashanti, having stepped down as president of the world’s biggest gold miner, Barrick Gold.
History shows that when a South African miner appoints a foreign CEO it is usually because the company has its eye on international assets and is looking for a leader to steer a global strategy, but AngloGold has gone well past that stage.
Dushnisky, praised for his skills in government and community relations, has a wealth of knowledge about gold mining around the world and the problems afflicting it, according to analysts.
Makwe Masilela, chief investment officer at Makwe Fund Managers, said appointing Dushnisky was a good move because AngloGold was no longer a South African company but a global one.
“If AngloGold intends to continue to grow globally — they don’t have a choice because there is nothing more to do in South Africa — then you need someone with global experience,” Masilela said.
AngloGold and Barrick, although different in gold production size and market capitalisation, face similar problems, such as battling tough regulatory environments in the Democratic Republic of Congo and Tanzania, and trying to find low-cost ore reserves at a time when the gold price has dropped 6% over five years.
During his three years as president of Barrick, Dushnisky — who some have dubbed “Mr Fixer” — helped to reduce the company’s debt from $13-billion to $6-billion, a process AngloGold is familiar with and a journey it has been on since its debt peaked at $3.7-billion in 2014.
AngloGold currently has debt of $2.2-billion (about R29.2-billion), according to Bloomberg data, and wants to cut it further while returning value to shareholders, a strategy initiated by outgoing CEO Srinivasan “Venkat” Venkatakrishnan.
Venkatakrishnan is leaving to take up the position of CEO at Vedanta Resources.
Dushnisky, 54, will be fighting the same campaigns as at Barrick, albeit under different conditions.
His experience of working in Australia, North and South America and Africa will come in handy as AngloGold has assets in similar regions, with Africa leading.
Analysts have said government relationships are vital in being able to navigate the regulatory regimes of South Africa, Tanzania and the DRC.
AngloGold’s South African operations now produce 13% of the group’s gold, down from 30% five years ago. The question is whether AngloGold will hold on to its remaining South African assets — an underground gold mine, Mponeng, and two surface projects — after selling two of its mines last year because of increasing costs and a weak gold price.
The draft Mining Charter 3 does not bode well for the company’s plans in South Africa. Aspects of the charter, particularly the 10% free-carry option that the industry says will make it uncompetitive, are still being debated.
Dushnisky’s plans for the remaining assets in South Africa will be watched closely, especially after AngloGold chairman Sipho Pityana, in an interview with Bloomberg last week, pointed out that shareholders were asking why the company was holding on to high-cost mines instead of focusing on lowcost areas such as Brazil.
Masilela said the issue was not about quitting South Africa specifically, but rather about how to deal with assets that were too expensive to mine, it would have sold highcost mines if they were anywhere else in the world.
Ore reserves in South Africa’s deep, labour-intensive gold mines were inevitably becoming depleted and of lower quality.
Apart from the operations in South Africa, AngloGold has 12 assets in other parts of the world. Whether it can reach a position where it can compete with its low-cost, modernised and mechanised peers such as Barrick will depend on how Dushnisky positions the business.
Masilela said AngloGold had a lot of work to do to improve its competitiveness.
“If conditions persist, it might make getting there even more difficult. Currently, conditions are not conducive, given commodity prices,” he said.
“AngloGold has tried mechanisation and there are a few successful examples, but South Deep is still struggling. It’s a lot of catch-up that would still need to be done.”
In Ghana, AngloGold is focusing on transforming its Obuasi mine from a conventional operation to a mechanised one.
Getting this right will be crucial for AngloGold, and if it does it can expect production of 2 000 tons of gold by the end of next year in the first phase of the mine.
Other opportunities for AngloGold, if the gold price improves, are its greenfields projects such as Quebradona in Colombia.
This project holds out the prospect of possible diversification into copper for AngloGold, because it has substantial reserves of the metal.
If AngloGold intends to continue to grow globally . . . then you need someone with global experience
Makwe Masilela Chief investment officer at Makwe Fund Managers