On-The-Air (19/02/2016)

19th February 2016

By: Martin Creamer

Creamer Media Editor

  

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Every Friday morning, SAfm’s AMLive’s radio anchor Sakina Kamwendo speaks to Martin Creamer, publishing editor of Engineering News and Mining Weekly.  Reported here is this Friday’s At the Coalface transcript:

Kamwendo: The once-mighty Anglo American was this week reduced to a pale shadow of its former self.

Creamer: It has gone from being as a big as a house to being as small as a mouse and I don't even know if they can still squeak. In the late eighties, this company, Anglo American, used to have something like 650 assets. Now, what they told us this week is that they are going to limit that down to 16 assets.

It is a major cut, two thirds of the commodities that they are engaged in they are exiting. What does this do for South Africa? Firstly, we need to ask the question is listing in London what it is all cracked up to be? Because, they listed there seventeen years ago in 1999 and since being listed in London it has been one downhill for Anglo American.

So, had they stayed primary-listed on the Johannesburg Stock Exchange, would it have been better? That is the question people are asking now. What has happened with London is we have had complete bullying by analysts and fund managers always calling on them to withdraw from South Africa and having huge demands as to which next commodity they must do. Who has made all the money out of this? Not the shareholders, our provident funds that are in this, what did we get out of it?

Very little, but we do know that we need a big corporate champion in South Africa. We no longer have that corporate champion, we know that people are always calling for small business development. But, it is the small companies that feed off the big companies. You want those big companies because they help the small companies.

What have we got at the moment? We know that our former Minerals Resources Minister when he was in London last year said we do need a big corporate champion and a big mining champion. We also know that Gwede Mantashe in a guest column to us, when he wrote he said we really need a local mining champion that can give South Africa the sort of recognition that Nestle gives to Switzerland, that General Electric gives to US, that BHP Billiton gives to Australia along with Rio Tinto, that Vale gives to Brazil. We have got nothing at the moment.

In fact, our South Africans have built the other things. We have helped build BHP Billiton, which contains Gencor. It has obviously come back to us know with South32, because they have thrown it out. We have also helped create other companies around that are no longer benefitting us. So, what impact does this have on government institutions like Transnet. Anglo American is getting rid of coal in South Africa, totally.

What impact will that have on Transnet, which takes the coal down to the port? On Eskom, which relies on that coal? It is going to have new owners now, we don’t know what who those short listed owners are. One of them looks pretty good that I hear on the grapevine. Hopefully they will take that and list that on the Johannesburg Stock Exchange and do something good with it, because we have always not known what is going on with coal and Anglo, because they never listed those coal assets on the Johannesburg Stock Exchange.

But, the big thing was that we made a mistake by allowing the headquarters of Anglo American to go to London. Why should it? The Australians said oh no you don’t when it came with BHP Billiton they were going to do the same things. They said the head quarters will be in London and government said over our dead bodies. You have equal footing, one in Australia and one in London. You will find that the Melbourne part of BHP Billiton actually wields more strength then the London side of BHP Billiton.

We have lost out here because so many of our top executives have gone there and haven’t really been able to cement a good relationship with the government. They haven’t really been accessible as they should have and now we can see the result, where we are going to go down to a very small pale shadow of what Anglo American was in the past.

Kamwendo: Kumba Iron Ore (KIO) is gaining investor attention as Anglo American unbundles it out of its cut portfolio and also platinum, diamonds and copper are the only metals to survive the massive Anglo downsizing exercise.

Creamer: Exactly, KIO attracted quite a lot of attention, because we saw their shares lift far higher then Anglo’s after Anglo announced the new Anglo. That is because, obviously investors see potential there.

It is another story of Anglo selling off. Selling always sounds bad, because it looks like someone does not want something and it is their moving out of iron-ore, not only in South Africa, but also in Brazil they are saying they will complete the iron-ore project there and they will review it.

Even though it has been declared non core, are they still looking at holding on to what they did in Brazil with iron-ore. That has been one of the downfalls of the company, they spent a fortune there $13-billion, over their budget. But, they are clinging on to platinum, diamonds and copper. That is good, because platinum is an incredible metal and will get a lot more attention that it deserves. We know that the big asset there is in Limpopo in Mogalakwena.

Then in diamonds in Venetia, also in Limpopo, where they are spending R20-billion there and are expanding that. So, that creates a lot of hope. When it comes to copper, of course, that is outside the country, in South America. It is also a bit of a sad note there, because Anglo used to have copper interest in Central Africa, and the future of copper is in Central Africa and not in Chile. Chile you can see the grades declining, the depth of the mine going deeper and deeper.

Their two assets that they kept there are good and they do have quite a long outlook. The real future is in Central Africa and look how the company lost out when it exited its copper interest in Central Africa. We know that the prettiest girl on the mining block is in the Democratic Republic of Congo where all that low-level copper is with high-grade. Will they be able to benefit from that.

The jury is out on a lot of things here, because this down sizing has hurt the South African economy. One imagines that if they had stayed with their primary listing in Johannesburg, we could have had more out of what was an iconic company and had a lot of involvement in our economy in the past.

Kamwendo: Thanks very much. Martin Creamer is publishing editor of Engineering News and Mining Weekly.

 

Edited by Creamer Media Reporter

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