Mining giant WAS ready to sweeten £405m Sirius bid
As investors fight to rescue savings, we reveal...
ANGLO AMERICAN considered offering Sirius Minerals investors shares in Anglo itself as part of its takeover bid, the MoS can reveal.
The mining giant behind the controversial £405million takeover of Sirius Minerals looked at the plight of 85,000 small shareholders in the fertiliser miner who face big losses because they had bought into the Yorkshire firm at a higher price than the 5.5p per share being offered by Anglo American.
The alternative idea would have allowed Sirius investors to own Anglo American shares, giving them a likely future return from Sirius’s potentially lucrative mine.
It could have softened the blow for the small shareholders in Sirius – many of them locals who have ploughed life savings and pension pots into the company, which faces going bust after running out of money to complete the potash mine near Whitby. A City source said: ‘Anglo did not want to be seen to be encouraging large numbers of not very well-informed shareholders to buy stock in a company that they know nothing about.’
Anglo American chief executive Mark Cutifani has insisted his offer for Sirius is ‘fair and reasonable’.
He told the MoS: ‘We do understand the issue where people may have bought in [to Sirius] at a higher price and we are sympathetic. But we believe the offer we put on the table is appropriate.’ The mine needs a further £2.4billion to start producing its reserves of polyhalite, a form of potash, which will be transported to the coast via a 23-mile tunnel for processing and export.
Cutifani said the project could become one of Anglo’s most prized assets. But he added: ‘There’s still a long way to go on development. The key risk in our head is the marketing. Polyhalite is a new product in the market, so that would take time to sell to potential customers.’
Sirius shareholders are furious that a project they were told could deliver them huge riches now looks like costing them a fortune. However, shareholders have been warned by Sirius chief executive
Chris Fraser that Anglo’s bid is the only way to save the company. Attempts to raise money on the markets have fallen flat and the Government appears uninterested in bailing out the firm.
Sirius shareholder Ian Martignetti said the Anglo offer is still ‘wide of the mark’. He added: ‘If Anglo had offered between 12 and 13p, plus shares, the bid wouldn’t have felt so greedy.’
Last week, hedge fund Odey Asset Management lent its support to Sirius’s small investors, who are so angry they are threatening to block the takeover at next week’s shareholder vote. In a joint letter to the boards of Sirius and Anglo, the Mayfair firm said Anglo’s bid ‘made a mockery’ of the equity value of Sirius, which was valued in September at £893million – 120 per cent higher than the Anglo offer. It added that the current bid ‘does not reflect fair value’ and said it would support an offer of 7p or higher.
Odey Asset Management, run by Crispin Odey, has bought a 1.29 per cent stake in Sirius at an average of 4.9p per share and could derail the deal if it wins support from other institutional shareholders.
Jupiter Asset Management, where Odey’s wife Nichola Pease will become chairman next week, has a 7.8 per cent stake in Sirius. It has also spoken out against the Anglo American deal, calling on the Sirius board to pursue ‘any alternative options’ ahead of the takeover deadline.
MARK Cutifani, the chief executive of mining giant Anglo American, is persona non grata with Sirius Minerals shareholders, who say his fraught takeover bid for the Yorkshire fertiliser mine ‘stinks’.
But he says he has ‘even tougher critics’ than the furious pensioners, pub landlords and war veterans who stand to lose fortunes through Anglo’s controversial £405million bid for Sirius... his seven children.
‘They are all focused on a greener world, and they are looking at me and saying, “What sort of legacy are you going to leave us?”’ he says.
Cutifani’s children, aged between 20 and 35, are singing from the same hymn sheet as Anglo’s shareholders and environmental groups, who are forcing the mining sector to clean up its act and fix what the seasoned Anglo boss calls its ‘crisis of reputation’. But, controversially, Cutifani doesn’t think they’re being particularly fair.
He explains: ‘When you look at industry reputation surveys, we [miners] are right up there with estate agents and bankers. Mining drives about 45 per cent of the world’s economy, disturbing less than half a per cent of the world’s surface in the process. But when we have a problem, it’s usually a high-profile issue.’
Anglo American, part of the FTSE 100 and also listed on the Johannesburg stock exchange, is one of the world’s biggest mining groups. It produces millions of tons of commodities each year, including coal, copper, iron ore, platinum, palladium and diamonds. Last year its 34 mines across South Africa, the Americas and Australia generated $3.5billion (£2.7billion) profits on almost $30billion revenues.
As part of his strategy of ‘reimagining mining to improve people’s lives’, Cutifani says that ‘energy transition’ and consumer products such as diamonds will make up 80 per cent of Anglo’s output in five years’ time, up from the current 70 per cent.
THERMAL coal – a type of coal that is used mainly for power generation – is out of fashion with the City, after BlackRock, the giant fund manager, said last month that it would no longer actively invest in fossil fuels. Facing investor pressure, Cutifani says he will continue to shrink Anglo’s thermal coal production, which today accounts for between 3 and 5 per cent of the group’s earnings – although he won’t exit overnight.
‘People bailing out of coal production is a rather hollow conversation,’ he says. ‘The resources are owned by the country, so if we don’t produce them, they will sell them to someone who will.’
Cutifani, who is the son of a crane driver and grew up near Sydney, has dug himself out of numerous holes over his 44-year mining career. His toughest test came in 2015, when Anglo shares collapsed in the commodities crash and Cutifani dragged the firm back into profit by a brutal restructuring that shed 85,000 jobs. He had sold the corporate jet two years earlier. The firm has more than doubled its productivity since Cutifani took over as CEO in 2013 and pays a five per cent dividend. Cutifani’s teacher from Wollongong University noted: ‘You must be smarter than you look.’
Yet he confesses Anglo ‘has done a terrible job of explaining what we do’ to the public. His message for non-governmental organisations (typically non-profit, social-crusading bodies) and other pressure groups which tar miners with the same brush as oil firms is that the transition to clean energy will be powered by ‘more mining’. Solar panels and wind turbines need copper, hydrogen production uses palladium, platinum and rhodium, and electric car batteries need copper and nickel. ‘The products we are producing will create a cleaner, greener world,’ he says. ‘We are making a big contribution to the energy transition because all our products are needed for solar energy, for wind energy, and for hydrogen power.’
Anglo is also shrinking its environmental footprint by reducing carbon emissions and using less water. A target for net zero carbon emissions will be set out in April, once Cutifani has given ‘careful thought’ to Anglo’s position on Scope 3 emissions – those produced by his customers. Rival miner Glencore last week branded BP’s new net zero ambitions ‘wishywashy’, because the oil giant gave little detail on how it would achieve its 2050 climate goals. Cutifani says he is ‘impressed’ by BP, but adds in what could be seen as a dig: ‘We are a company that walks more than it talks. It’s not about what we say; it’s about what we do.’
HOWEVER, he admits Anglo has ‘a long way to go’ on safety. Two years ago, it paid a share of a $400million settlement to South African miners who contracted serious lung diseases working in its gold shafts. Last week, it reported that 18 employees died last year. ‘It is tragic we continue to experience serious safety incidents,’ Cutifani says.
Anglo was also recently handed around $70million of environmental fines in Brazil, of which the vast majority related to the leaking pipeline at its giant Minas-Rio iron ore mine, which had to close for eight months in 2018.
In Sierra Leone, Anglo’s diamond mining business, De Beers, which produces around a third of the world’s diamonds by value, is working to shed the country’s historical links with the trade in ‘blood diamonds’ – gems mined in a war zone and used to fund conflict.
Anglo is helping thousands of artisanal – or pick-and-shovel – miners to get paid fairly for the 200,000 to 300,000 carats of diamonds they produce each year by providing a transparent route to market through the GemFair diamond accreditation scheme.
Cutifani says: ‘We have to make sure people don’t look at us through the eyes of blood diamonds, and help people understand what Anglo is doing to make life very different.’ He adds: ‘We believe around 98 per cent of the world’s diamonds are subject to a verification process. For the two per cent that aren’t, we are working with governments to clean that up.’
Cutifani says Anglo’s battle to buy Sirius Minerals is ‘another step towards a green commodity’, potentially adding polyhalite, a form of potash fertiliser, to Anglo’s output.
Last week, the 5.5p-per-share deal hung in the balance, amid speculation that Anglo may lose next week’s critical shareholder vote. Will Anglo’s climate friendly message persuade Sirius investors of the company’s virtues even though they face huge losses?
‘We are sympathetic,’ Cutifani says, but he adds that for now, Anglo is digging in on the price. For all his soothing words, the hard-headed former mining engineer may yet find that money still talks loudest for Sirius shareholders.