[miningmx.com] — TO: Cynthia Carroll, 20 Carlton House Terrace, London.
Dear Cynthia
Congratulations on Anglo’s decision to eventually start preparations for building your own coal-fired power station in South Africa.
Yes, I know it won’t be a big one or offer a solution to the country’s electricity problems. You will be generating just enough electricity to secure Anglo’s assets in South Africa a safe electricity supply, using almost squeaky-clean technology. Neither is this your core business.
Generation of electricity is very different from mining, an industry with unique risks and capital structures entirely different from almost everything with which a mining company concerns itself.
And I don’t think that you will even be operating the power station yourselves – you will probably do the spadework for it, and possibly help with financing.
But what I am most pleased about is that it will relieve much of the pressure on Eskom to supply electricity to the country in the years ahead.
Anglo, together with the other two mining giants, BHP Billiton and Xstrata, have profited more than any other company in our country from the bulk electricity that Eskom has provided for decades – at the world’s lowest prices – to Anglo with its mines and platinum smelters, Xstrata with its chrome smelters and Billiton with its aluminium smelters. But that’s another story.
To tell the truth, I am amazed that Marius, Mick and you have not sat around a table yet to devise a plan to generate your own electricity. Not to help South Africa – Eskom’s planning mistakes, after all, are its own fault – but to ensure that your enormous investments in the country don’t come to a grinding halt because of something as simple as power interruptions.
You are the only ones in a position to do this, especially if you work together. But that is probably just one of the big mysteries about large international corporations – that they almost never sit around a table to flesh out their common interests.
I call it a mystery, because no one actually knows why this does not happen. I have an ugly suspicion that it has something to do with big egos.
Is there any chance that things might be different this time? Simply by helping yourselves you will show South Africa an enormous favour.
I ask this because the mining industry – mining companies, the department of mineral resources and the unions – are meeting in the Drakensberg on Tuesday and Wednesday to discuss the industry.
Yes, these types of talk shops have previously been held in other industries but have never produced spectacular results. However, there is reason to believe that this time things will be different. To tell the truth, there’s a good chance that that it will be the best thing ever to happen to the mining industry in South Africa.
This type of summit has always been held when the industry is in crisis and major sacrifices are required from the parties. It generally ends in unions being persuaded that resistance to labour cuts serves no purpose and would probably only increase retrenchments.
What makes this week’s summit different is that it is planned not out of adversity and need, but to ensure that the mining industry rides the crest of the wave in the next upturn of the resources cycle.
In every company presentation the three of you predict that that the upturn is on the way. What you are less forthcoming about is the fact that electricity, or rather its short supply, will be the biggest stumbling block to cresting the wave.
You three are by far Eskom’s biggest purchasers of electricity. You are also – together with Exxaro – Eskom’s largest coal suppliers. This makes you the only players that can really do something about the electricity problem.
I do understand that at Anglo you’re sitting on a pile of some 60 million tonnes of low-grade coal, which is precisely suitable for the power station you plan. And if that is the case for you, Billiton and Xstrata are probably in the same boat.
Anglo consumes about 900MW of Eskom’s electricity, Xstrata more than 1 000MW and Billiton close to 2 500MW. Anglo moreover needs another 1 000MW for its expansion plans for the next five to 10 years.
If you could get the South African expatriates in Switzerland and Australia so far as to join Anglo’s plans for a power station, our country would not need to build Kusile. You could surely do no better for your shareholders than to ensure that your South African assets have reliable, safe electricity? Come on, Cynthia – invite them to lunch. As an experienced American you will know how to handle them.
*Copies to: Marius Kloppers, BHP Billiton Centre, 180 Lonsdale Street, Melbourne, Victoria and Mick Davis, Xstrata, Bahnhofstrasse 2, Zug, Switzerland.
Best wishes
Jan de Lange
