SOUTH32 would welcome an increase in mining sector mergers and acquisitions as it would create collateral opportunities for the company.
“From our point of view, there’s nothing like majors buying things because if they are buying big things they are breaking up a big company,” said Graham Kerr, CEO of South32 in an interview last week.
“Or if they are thinking about competition rules they will have to shed something. If that was to happen, such as an Anglo or BHP transaction we would be interested in some of the pieces that fall out of that,” he added.
South32 has a controlling stake in manganese mines in the Northern Cape in which Anglo American also has a share. Kerr has said in the past that he’d be interested in buying Anglo’s shares but only at the right price. Commenting last week, he said there had been no indication of Anglo wanting to sell its shares in the mines.
BHP’s recent takeover proposal of Anglo American and Glencore’s failed bid for Canada’s Teck Resources has upped the ante in mining sector mergers and acquisitions lately – a development that has made other CEOs cautious. “A lot of deals were made between 2005 and 2012 and a lot of these turned out to be really bad,” Jakob Stausholm, Rio Tinto’s CEO told the Financial Times.
“Now it feels like things are opening up a little bit … but from the Rio Tinto perspective, that’s not that relevant: I have no ‘fomo’, or fear of missing out,” he added.
Kerr is similarly cautious of potential asset overheat, preferring to focus on organic growth. “In the next two years we have copper growth of between 15% and 16%, and we have low carbon aluminium growth of 17% and 18%,” said Kerr. “The challenge of [larger] competitors is they have to continue to evolve the portoflio and do some of the hard work.
“That could create opportunity for us because some assets might come to the market at a good price. But we don’t feel we have to chase [deals] as it is opportunistic,” he said.
Kerr was more optimistic regarding business prospects in South Africa following the creation of the Government of National Unity. This was “cascading” through to state-owned organisations, especially Eskom which is now led by Dan Marokane, formerly head of generation at the company.
“The new Eskom CEO has been to Mozal (South32’s aluminium smelter in Mozambique) and is hugely interested in Hillside (in South Africa) and wants to go there. He is very open and engaging as to how we go forward,” said Kerr.
“The new CEO of Transnet (Michelle Phillips) – rather than telling us, lecturing us, and complaining about us – is sitting down with our teams,” said Kerr in a possible allusion to Transnet’s former management, led by Portia Derby.
