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David Mckay

Week turns sour for Carroll's Anglo

David McKay | Thu, 16 Jul 2009 20:15
[miningmx.com] -- DEVELOPMENTS of the past week at Anglo American could heap more pressure on Cynthia Carroll, the group’s CEO.

The first was news that Anglo Platinum’s earnings could be up to 99% lower in the first half of its financial year. The second is that after only a year, Anglo has lost Kuseni Dlamini, head of Anglo American SA.

According to some analysts, Anglo Platinum’s fortunes may well be in line with conditions in the platinum industry. The last six months is the first full period where lower platinum prices have been experienced which, allied to the unusual strength in the rand/dollar exchange rate, is uniformly bad news for every platinum market participant.

All eyes then on Northam Platinum, which I’m led to believe will shortly provide a trading update. If Northam Platinum suffers a hit to earnings similar to that of Anglo Platinum, then it may underpin how Anglo Platinum is more a victim of poor market conditions rather than the sole perpetrator of its own troubles.

But there’s a nagging worry for Anglo Platinum, and that’s its net debt of about R14bn.

A couple of analysts think the need for Anglo Platinum to shore up its balance sheet is unlikely in the short- to medium-term. But with committed debt facilities of about R26bn, it may have only a year before having to restructure, and possibly launch a rights issue.

Anglo American would have to follow its rights, which as an 80% shareholder will raise a question on whether the $4.7bn in debt it raised earlier this year will adequately cover the group as René Medori, chief financial officer, forecast earlier this year.

Dlamini adds to woes

Xstrata could exploit the troubles of Anglo Platinum among Anglo shareholders, but it’s more likely to watch and wait while Carroll and her team battle to contend with criticism, now compounded by the not completely surprising resignation of Kuseni Dlamini, head of Anglo American South Africa.

A significant part of Anglo’s defence against Xstrata’s merger of equals proposal was the close-knit relations Carroll cultivated with South Africa’s minerals resources department. The argument goes that although Carroll’s Anglo has had some difficult moments with government lately, it would be nothing compared to the upheaval of a merger with Xstrata. Who knows what may follow: retrenchments, the loss of Anglo’s JSE listing?

However, the resignation of Dlamini has – perhaps only temporarily - deflected the fears of what a merger with Xstrata might do. It could, in fact, darken government’s view of how Anglo runs its affairs and weaken the overall relationship.

Anglo has twice now appointed a black leader of Anglo American SA while simultaneously not empowering that person with clout at the plc level. It’s not that it should, it’s more a case that it doesn’t seem to be a structure that’s working.

The first was Lazarus Zim, who was CEO of Anglo American SA. No sooner had Zim passed through the tapestried walls of 44 Main Street, than he had quit the post preferring instead his own business interests where power was his, and his alone.

Anglo lifer Philip Baum was then appointed acting CEO of Anglo American SA until Dlamini was drafted. It seemed an interesting proposition for Dlamini who had served as chairperson of Richards Bay Coal Terminal in which Anglo has a 27% stake. I remember some scratching of heads at the appointment, however, mostly over the designation: he was now head. The CEO role was abandoned.

Shouldn’t that have been notice enough for Dlamini that the role was limited?

Clearly not, because on Classic Business, Dlamini told listeners he was looking forward to a role where the reach was global as well as regional; influence was local but also extended to the plc.

One dead role for another?

To be fair, I think Dlamini’s resignation shows that the real problem is with the position rather than the person.

It just looks like tokenism appointing a black businessperson to run Anglo’s South African government relations, while to appoint a white person would look like Anglo was not committed to transformation.

Better then to install a direct line from Anglo plc – probably through board member Fred Phaswana – to Pretoria. I’m told that’s what Anglo will do and sell it to the South African government as a more effective means of communication … which it might well become.

As for Dlamini, I am surprised Old Mutual appointed him if only because Dlamini has no financial services expertise. And anyway, isn’t he swapping one dead role for another?

How is running Old Mutual SA’s operations different from Anglo’s given that Dlamini has no executive influence, control or power over Old Mutual plc? One wonders that in his apparent eagerness to flee the cauldron of Anglo he hasn’t leapt into the fire of Old Mutual.



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