[miningmx.com] — THIS afternoon’s (Wednesday) results briefing by Anglo American turned into a warm fuzzy affirmation of the group’s commitment to South Africa, its good relationship with government, and government’s need to reassure international investors that business-friendly policies won’t be jettisoned in the wake of Polokwane.
The ruling African National Congress (ANC) held a meeting in Polokwane, South Africa, recently where delegates voted Jacob Zuma in as head of the party. Not only does Zuma come with the whiff of corruption — he’s to appear in court in August to face charges — but with the strong backing of the unions.
At the end of her presentation, Anglo CEO Cynthia Carroll – whose appreciation of the importance of the occasion was underlined by the fact that she even seemed to have added to her trademark scarf collection in its honour — wheeled out a high-powered team of deputy finance minister Jabu Moleketi, Department of Minerals & Energy director general Sandile Nogxina, and Public Enterprises director general Portia Molefe.
Surprise at their presence in London on Budget Day was diffused by the news that they would later host a post-budget briefing at South Africa House, but even so their presence was more than cosmetic, as Nogxina made the important announcement that a timetable has been set up to grant Anglo new order mining rights over all its South African platinum, coal, iron ore and base metal operations by March 31.
Carroll understandably called this “a landmark achievement’ that follows significant black economic empowerment (BEE) progress in these operations, and made all the predictable noises about its benefits for both the group and South Africa.
Moleketi was adamant that there will be no major changes in major economic policies as a result of Polokwane – though one may question how much such assurances are worth – and Molefe, after paying tribute to the contribution of mining and heavy industry in restoring “stability’ of power generation, outlined longer-term solutions.
She said Eskom will be back to a 5.9% safety margin this year and 18% in 2009. But she warned that one of the problems is that electricity in South Africa is too cheap, and in future its pricing must recover current costs. Which is all very well, but skims over the point that it was government’s mishandling of the issue that landed us in our present mess.
Carroll later told a questioner that we have to think out of the box in solving the power crisis. She said Anglo is looking at all options, though she backtracked somewhat on an earlier throwaway suggestion that Anglo might hire barges to moor in the ports and feed electricity into the grid.
Still, even if this was little more than a PR exercise, it went down well, helped by the fact that the trio are among the better, more plausible and smoother communicators of our public sector high-ups. It also gained from the fact that an upbeat Carroll had in front of her an excellent set of results, with a succession of records and highest-evers.
After all, it would be a pretty poor commodities company that isn’t doing well in the current boom. And even if Anglo’s project pipeline has doubled in the past year, to US$40bn, it’s significant that the only two projects Carroll singled out were both said to be in the second cost quartile. While by definition there are four quartiles, and the second is in the upper half, most miners at least try to find first-quartile, and hence the least risky, projects.
About the only operating blemish was a fall in the operating profit from coal, largely because of rail and port bottlenecks in Australia. Where have we heard that before? Anglo is investigating alternative facilities, but fears this will remain a problem for at least another year.
Organisationally, the portfolio restructuring started two years ago has been virtually completed. A new post, group head of procurement, has been created, and initial savings of $1bn are being targeted from procurement and shared services. A head of asset management has also been appointed, to make group assets sweat.
Carroll is confident that Anglo has some of the longest-life mines there are, and that Anglo is not only well placed for organic growth, but will pursue “all sensible’ acquisition opportunities during the current rationalisation of the resources sector.
While a couple of analysts I spoke to didn’t think they’d really learnt much new, the market obviously liked the package. By mid-afternoon the JSE shares were 750c up on the day, at 47,840c, a 1,5% gain outperforming not only a generally weak market, but also a 0,5% gain by the resources index.
