Anglo prunes business and management

Allan Seccombe | Thu, 22 Oct 2009 08:25

[miningmx.com] -- ANGLO American, the R373bn mining business which recently survived a merger attempt by rival Xstrata, is slashing layers of management in a bid to drive costs down and streamline the business. It has also set out plans to divest from assets deemed non-core.

Among the management casualties are Ian Cockerill, the former Gold Fields chief executive who more recently headed up Anglo's coal division, and Philip Baum, the acting chief executive of the South African business between 2003 and 2008. He was more recently the chief executive of Anglo Ferrous Metals.

Russell King, the group's chief strategist and described as being just below the chief executive in the company's hierachy, is also leaving the company.

Anglo American chief executive, Cynthia Carroll, said the company was reducing overhead staff by 25% at a cost saving of $120m a year. That 25% translates to some 2,700 jobs on top of the 19,000 retrenchments at an operational level that she announced earlier this year.

"I believe that these actions will position Anglo American well for sustained, profitable growth in the commodities we have identified as being the most attractive," she said in a statement.

Anglo shareholders want to see performance from the company, which is regarded for have underperformed relative to its peers. It embarked on a restructuring of the business under then-CEO Tony Trahar, a process that has gathered momentum under Carroll's stewardship.

Shareholder unhappiness with Anglo's performance was thrown into the spotlight when Xstrata proposed merging the two companies, slimming down its bulky management and finding synergies between the two so that it can better compete for resources in the future against the likes of BHP Billiton and Rio Tinto.

Xstrata has a six-month window before it can make another overture to Anglo, a window many see as critical for Anglo's management to perform.

It's not entirely clear at this juncture whether Anglo will have a South African chief executive, a position that has been fraught with political difficulties for the London-based company because of government demands that it be filled by a black person.

Given the way the business is restructured, it appears unlikely there will be a South African country chief executive position, with the heads of seven business units reporting directly to Carroll.

Anglo has created seven business units identified as platinum, copper, nickel, metalurgical coal, thermal coal, Kumba Iron Ore and Iron Ore Brazil. It made no mention of its diamond interests which it holds through a 45% stake in De Beers.

Anglo said it had also identified new management which included Norman Mbazima, who is heading up the thermal coal unit. He was formerly head of Scaw Metals, which is now up for sale.

Duncan Wanblad, who served with Mbazima as acting joint chief executive at Anglo Platinum after Ralph Havenstein left, is now in the position of group director of non-core assets, which is a cluster of the assets up for sale.

These assets include Scaw Metals, Copebras, a Brazilian fertiliser company, Catalao, a Brazilian producer of ferroniobium and Anglo's zinc businesses. Tarmac, which has been on the block for a while, is also in this group. Together these businesses made up about 11% of Anglo's earnings before interest, tax, depreciation and amortisation (ebitda).

Macquarie estimates these assets could fetch up to $6bn, which Tarmac making up half of that, going a long way to ease Anglo's debt burden of around $11bn.

"As these assets are of a poor quality, short life or have no strategic fit, the decision to get rid of these assets is welcomed," Macquarie said in a note.

The zinc unit comprises the wholly owned Skorpion mine in Namibia and Lisheen mine in Ireland. It holds of Black Mountain mine and Gamsberg project in South Africa. These assets generated 340,500 tonnes of zinc last year and ebitda of $209m.

Scaw is a steel group operating mainly out of South Africa, South America, Canada and Australia. Last year, it produced more than 1.5 million tonnes of steel products, generating ebitda of $309m.

Anglo argues these changes were already in the works ahead of the June approach by Xstrata for a nil-premium merger and ahead of the arrival of new chairman John Parker.

Asked why Cockerill, Baum and King were leaving, Anglo spokesman Pranill Ramchander said: "In the restructuring, those positions became redundant. They are no longer with Anglo."

As part of the restructuring, five group directors based in London will be responsible for corporate functions. They are Rene Medori, the financial director, Brian Beamish, David Weston, Mervyn Walker and Peter Whitcutt.