Change of management might be just the tonic for Anglo American
Under pressure again after a horror year, Anglo American’s fortunes might turn around under new management.
Only a few years ago Anglo American was celebrating Mark Cutifani’s rescue of the venerable mining house.
Now the company is back in the depths of trouble, its shareholders in revolt and vulnerable to a takeover – from BHP, or even a counter offer from Rio Tinto or Glencore.
While BHP will have been crunching the numbers on Anglo for some time, the unsolicited offer came out of the blue on April 16, when BHP lobbed an all-scrip offer to combine the two companies – excluding the bulk of Anglo’s South African platinum group mines and the Kumba iron ore operation.
News of the bid leaked nine days after it was delivered, and before any detailed talks were launched, leaving BHP to wonder whether the leak was a deliberate attempt to stoke competitive tension in the market.
Anglo American shares had only just begun a recovery from a horror year in 2023, topped off by a 20 per cent tumble in December after the company slashed its copper outlook.
While BHP’s offer comes from a position of strength, it is not necessarily the kind of predator’s approach that will be rejected out of hand by Anglo shareholders.
Mr Cutifani inherited a debt-ridden disaster of a company in 2013, which was running 68 mines across the globe, had just written down billions on its disastrous foray into Brazilian iron ore and was at war with its own workforce at its core platinum mines in South Africa.
As commodity prices tumbled in 2015 Mr Cutifani was nearly forced to break up the company and sell its coal and iron ore assets, and focus instead on copper, diamonds and platinum.
Anglo American was valued at as little as £4bn ($7.6bn) in early 2016 and was forced to fend off interest from Indian billionaire Anil Agarwal early in 2017.
But a focus on costs, simplicity and repairing fractious relations with governments and its own workers – along with the commodity price recovery – left Anglo valued at more than £50bn by the time Mr Cutifani stepped down in 2022.
But only two years later Anglo is again under pressure after a horror year, weighed down by falling prices for diamonds, platinum and palladium.
Anglo American’s Queensland metallurgical coal mines have been under scrutiny since an explosion at its Grosvenor underground operation in 2020 almost killed five workers, and it only returned to production in 2022.
And its stock was hit badly in December due to a savage downgrade of copper production, when Anglo – now under the leadership of former strategy director Duncan Wanblad – cut 200,000 tonnes of copper from its expected 2024 production, largely due to geological issues at its Quellaveco mine in Peru (a key growth asset) and the need to refit a processing plant at the Los Bronces mine in Chile.
The cut not only took away the near-term growth outlook for Anglo, but added to the sense the company was again starting to drift compared to its peers. Anglo shares tumbled 19 per cent on the day, and were down close to 50 per cent for the year.
Anglo’s biggest single shareholder is South Africa’s state-owned Public Investment Corporation (PIC), which holds about 8.3 per cent of the company’s stock – having sold down substantially as the share price recovered after the lows of 2016.
PIC’s ultimate view will be coloured by local politics, but BHP’s decision to leave out the company’s South African assets from its bid may play to resources nationalism.
The rest of the Anglo register is dominated by institutional shareholders such as Blackrock and Vanguard, which together hold about 14.2 per cent of the company’s stock, according to Bloomberg data.
Their biggest issue will be not just value, but whether Anglo’s asset will perform better in the hands of BHP.
The BHP leadership team under Mike Henry has admirable form for running its assets well.
The question will be whether shareholders of both companies think the team can digest an acquisition of this size – and whether Anglo’s position is the result of a commodity price blip, as its management insists, or a sign its assets would be best held by another company.
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