[miningmx.com] — CHRIS GRIFFITH is being hailed as the right man at
the right time for Anglo American Platinum (Amplats), the R109bn company over
which he was last week appointed CEO, effective from September 1. “I only see
positives from this,’ says one analyst in an e-mailed response to Finweek’s
questions. His view is widely reflective of how other analysts think.
Griffith replaces Neville Nicolau, who was just over four years in the job at Amplats.
Before him, there was Ralph Havenstein, also four years at the helm of Anglo
American’s 80%-owned listed subsidiary. Assuming, then, Griffith is given the
similar length of tenure, one can reasonably expect a more favourable report card
for him. Nicolau steered Amplats through the economic crisis in 2008, then into
Eskom’s new pricing regime and government safety stoppages. He fared well initially
and was praised by the market for boosting productivity, but his luck ran out.
The person signing Griffith’s report card is none other than Cynthia Carroll, CEO of
Anglo American and the chairperson of Amplats itself. The perils and benefits of the
parent CEO simultaneously acting as chair of the subsidiary can be debated until the
cows come home, especially the role it played in Nicolau’s resignation, but Griffith
can be assured of unrelenting scrutiny as he attempts to navigate Amplats through a
restructuring process, the extent of which is also attracting controversy.
All in all, Griffith has little margin for error. In his favour, however, he would seem
to be extraordinarily blessed with good fortune, or good timing, or both. Griffith,
who was formerly head of Amplats’ joint ventures, was appointed CEO of Kumba Iron
Ore in 2008 when the iron price was trading at about $60/t. Three years later it was
at $184/t, a record high amid booming Chinese demand. The price has since settled
back to $134/t, but Griffith’s undoubted qualities as a leader, an expansion strategy,
and the fact Kumba’s product is niche has only been served by favourable prices.
When all’s said and done, the extractive industries are cyclical; producers are
generally price-takers. Expansive capital projects are built in rising markets; cut-
backs (like now) as markets (and confidence) falls. It’s inefficient, therefore, if
you’re a decision-maker at a major producer; it’s preferable to be building resilient
projects, which raises questions over the quality of Amplats’ expansion programme,
and the ones Nicolau inherited.
So what can we expect from the market?
The swing factors in the platinum industry fall on the supply side of the equation:
supply from recycling as well as newly mined supply. In a February report compiled
by SBG Securities, it estimated downside to new supply, predominantly from mining
juniors. As for existing supply, there’s the hope both Griffith and his newly appointed
counterpart at Impala Platinum (Implats), Terence Goodlace, have the platform and
momentum to install a greater degree of supply discipline.
Says Rene Hochreiter, of Allan Hochreiter and a long-standing platinum expert and
rated analyst: “We’ve seen this type of PGM [platinum group metal] market before,
and no, it’s not different this time’.
The controversy regarding the restructuring of Amplats’ assets, however, is the
extent of it. According to Johann Steyn, an analyst at Citi, some 400,000 ounces of
Amplats’ 2.6 million oz in production falls into the unprofitable category that interim
CEO, Bongani Nqwababa, stated last week Amplats would not tolerate.
“I can assure you we’re not at that level [of unprofitable ounces],’ Nqwababa
responded to Steyn. This raises the question as to just how extensive Amplats’
restructuring will eventually be.
Stuart Murray, CEO of Aquarius Platinum, cast aspersions on the extent of the
production cuts somewhat stealthily in his company’s June-quarter production
results, stating in comments about the platinum market that macroeconomic factors
inhibiting PGM demand would be “. exacerbated by the markets’ well-placed doubt
that the major platinum producers will cut supply meaningfully’.
Griffith’s own assessment of the situation was to recall his move to Anglo Platinum
from JCI in the Nineties, a hop he described as “joining the poor cousin’ as Anglo’s
platinum assets were then viewed. “It’s time will become again,’ Griffith says of the
platinum market. In the meantime, he will have just four months to make his mark
on Amplats’ restructuring proposals. The blue-print for the group’s return to health
is due by December.
– Finweek
