Venkat’s move a catalyst?
Anglogold has transformed its fortunes under its outgoing CEO and some think the company could be ripe for plucking
Anglogold Ashanti may be vulnerable to a takeover following CEO Srinivasan Venkatakrishnan’s surprise resignation on Monday. He is joining London-listed diversified miner Vedanta Resources as CEO.
His impending departure — Venkat, as he is widely known, will officially stand down at the end of August — has helped create fresh intrigue around Vedanta, whose billionaire executive chairman, Indian national Anil Agarwal, took a 21% option on Anglo American shares last year through his investment vehicle Volcan.
It was a move that many thought could lead to a fuller combination of Vedanta and Anglo.
Anglo American, in turn, has been headed by Venkat’s former boss Mark Cutifani since he left Anglogold, which departure opened up the top job to Venkat, who was CFO at the time.
What Agarwal plans to do with Anglo still has everyone guessing. Last year Bloomberg described it as “mining’s biggest mystery”.
But Investec Asset Management portfolio manager Hanré Rossouw says: “I’m more in the camp of the cynics when it comes to a Vedantaanglo merger. Vedanta is much smaller so I don’t think we’d see a merger but we could see more corporate deals. I don’t think we’ll see friends reunited.”
While Venkat did not comment on his decision outside of a press release, Cadiz Corporate Solutions’ Peter Major, who describes him as “smart, hard-working and a really nice guy”, said: “Vedanta’s a much more diversified company, so possibly he needed a new challenge.” Venkat (53) has been with Anglogold Ashanti for 18 years, initially through Ghanaian miner Ashanti, which Anglogold bought in 2004.
Anglogold chairman Sipho Pityana described Venkat’s departure as a big loss but said: “We would have been foolhardy as an organisation to assume he would be with us forever.”
Rossouw is now concerned that a leadership change at Anglogold could prompt opportunistic buyers to wade in. The company trades on a much lower rating than its international gold mining peers, including Barrick, Newmont and Kinross.
“The discount that Anglogold trades at could create a bit of M&A excitement,” says Rossouw, with Venkat’s departure acting as the catalyst.
After all, Anglogold’s genial and well-liked CEO has done most of the hard yards for an opportunistic buyer to swoop in. He helped clean up Anglogold’s huge and costly hedge book, reduced debt and largely unburdened Anglogold of its tricky and loss-making SA assets, leaving the company more of an international gold miner, with only about 10% of its production now derived from SA.
When Venkat took on the CEO role in 2013, Anglogold ended the year with net debt of Us$3.11bn. By the 2017 full year, it was $2bn.
Last year, Anglogold placed its Tautona and Savuka mines on care and maintenance, sold Kopanang to Chinese firm Heaven-sent, and offloaded Moab Khotsong and Great Noligwa to Harmony Gold. That leaves it with Mponeng in the West Wits region, as well as its mine waste solutions tailings treatment plant and surface rockdump reclamation operations.
That’s not to say Anglogold doesn’t have some pressing challenges. A stand-off with the Tanzanian government over sweeping changes to its mining laws may hurt its Geita mine there. And there is the redevelopment of its idled Ghanaian outfit Obuasi, which Anglogold has said “will rank among the largest contributors to the company’s global production” target of 400,000 oz/year.
But Pityana denies that these issues, along with a possible final split of the SA business, will be placed “on hold” as the company seeks a new head. “All of these things that Venkat has been pursuing have been in the context of our strategy,” he says, adding that a team had been working with him.
While Pityana has lauded the depth of talent built up by Venkat, Anglogold will throw open the search for a new CEO. “We always benchmark our internal potential with outside talent, so the search process would be open-minded and open to global potential candidates — it’s not closed in that sense.”
He’s not fazed that potential candidates might be thin on the ground, given the complexity of running an Sadomiciled, deep-level mining business with its accompanying labour and political headaches.
“Since 2010 we’ve relied on our own internal self-help measures to survive very tough conditions without tapping the equity market and we’re now, by all accounts, globally competitive and self-sustaining . . . we’ve shown an incredible amount of discipline in our capital allocation. All those things will attract good candidates to the business because you have a very well-positioned company with good prospects,” says Pityana.