Carroll nails colours to Anglo Platinum

[] — I’D HAVE loved to have been a fly on the wall in meetings between Anglo American boss Cynthia Carroll last month and the firm’s various shareholders. I understand it was around then Carroll was giving expression to her proposed appointment as Anglo Platinum chairperson. How did she justify it?

The news only broke last week causing quite a stir principally because Carroll has a full time job as CEO of Anglo American. As such, the simultaneous assumption of both positions ignores recommendations in King III, the corporate governance “bible’. In case there was any doubt now, it’s clear that King III only provides recommendations.

If Carroll spoke volubly to shareholders on her increased participation in Anglo Platinum, this wasn’t much transferred to the general investing public. The word is that this was a position Carroll definitely motivated for and wanted. John Parker, Anglo American chairman, was silent on the matter.

In a telephonic interview, Carroll said her appointment at Anglo Platinum made sense because she knew the asset extremely well.

There were, however, some other clues as to why she, and not a host of other people, is now the chair Anglo Platinum including the need for “alignment’ with the parent firm. Her strong relationship with the South African government would also serve Anglo Platinum well, she said. Her latter point holds most water because it seems plain to me that Anglo is politically in a delicate situation.

That’s because the group is effectively sueing the mineral resources department over the loss of mineral rights that Anglo feels should have fallen to its 66% owned Kumba Iron Ore but are not owned by Imperial Crown Trading. At the same time, Anglo Platinum has not yet received its new order mineral rights even though it completed its last required empowerment deal nearly a year ago.

These are competing, conflicting pressures with a single, influential entity – the Government – which, as colleague Brendan Ryan has observed in his own column, scares half if not all the industry to death given the vagueness of South Africa’s minerals legislation. Speak to anyone at Kumba and you’ll see the matter of the mineral rights is being handled centrally by Anglo. So now is Anglo Platinum’s mineral rights issue. As Carroll hinted, it’s all about alignment in these politically sensitive times for Anglo.

Then there’s the (other) elephant in the room: Anglo Platinum is the jewell in Anglo American’s crown. Of all the commodities until its belt, none compares to its platinum reserves in South Africa if only because none of Anglo’s peer group members have any. Well, Xstrata is making a go at building a platinum portfolio, but BHP Billiton, Rio Tinto and Vale are without any white metal which makes it a clear, winning differentiator for Anglo.

As Adrian Saville, chief investment officer at Cannon Asset Managers, points out: “Anglo Platinum is central to Anglo American. Last year it accounted for about a quarter of the business. It is a substantial jewell in the crown’.

So it’s crucial Carroll make a success of Anglo Platinum. It’s crucial for Anglo, and it’s crucial for her because should she fail, Carroll may well be facing the door. By establishing herself as the primum mobile at Anglo Platinum, Carroll gets the reins where it matters most. It couldn’t be anything else given Carroll’s now widely acknowledged micro-management.

If Carroll spoke volubly to shareholders on her increased participation in Anglo Platinum, this wasn’t much transferred to the general investing public

Since installing Neville Nicolau, Carroll has worked wonders with Anglo Platinum. Fatalities have been pulled right back and costs have improved considerably. But in both cases, the improvements were off a high base. Having promised zero cost increases for three years, the pressure is really on which provides another great reason why Carroll wants to be in that boardroom when the decision-making process is being formed, never mind made.

“Structurally, Anglo Platinum is up against material headwinds,’ Saville said in a podcast with Miningmx. “Electricity prices will continue to rise, there are substantial wage pressures, and a clear requirement to get safety right.’ He does believe, however, that the prospects for Anglo Platinum are exceptionally good if these cost pressures can be addressed. There is no better ore to sit on than that owned by Anglo Platinum.

One sidelight to Carroll’s appointment at Anglo Platinum, and one that hasn’t received much attention, is the fact that it reveals a lack of transformation that may worry the South African government. To state the bloody obvious, Cynthia Carroll is a white American women and she replaces Fred Phaswana. I wonder how this will go down with government and the mines minister Susan Shabangu who is exciteable on the matter of transformation.