PIC pressures Anglo American to hive off South African arm

Anglo American is under pressure from its top investor to hive off its South African operations.

Workers repair a shovel excavator at Anglo American’a Sishen mine in South Africa.

Anglo American is under pressure from its top investor to hive off its South African operations in a move that could herald the break-up of the mining giant.

South Africa’s Public Investment Corporation has begun turning the screw on chief executive Mark Cutifani, and is demanding a shake-up of the FTSE 100 stalwart.

Its proposal would see all Anglo’s South African operations bundled into a new national mining champion. Shares in the new company would be distributed to investors.

The PIC, which manages more than £100 billion ($169bn) in public funds and is overseen by South Africa’s finance minister, took advantage of a precipitous fall in Anglo’s share price over the past year to ramp up its stake in the £12bn conglomerate.

Its latest bout of share buying in May pushed its holding past 13 per cent, up from 8.3 per cent a year ago. It has begun to use its new position of influence to push the spin-off plan.

Mr Cutifani had so far resisted its demands, sources said. Carving out all the South African operations would reduce Anglo, once the world’s biggest miner, to a middling player focused on just two divisions — its highly coveted copper mines and diamond giant De Beers. A source said: “If they did this, it would be the end of Anglo. There would be a queue of bidders for copper, offering big numbers that they would find it very hard to turn down. That would leave it with De Beers.”

The PIC proposal is more extensive than the overhaul Mr Cutifani has championed. Anglo was the worst performer in the FTSE 100 last year, with shares losing 75 per cent of their value as the company was hit by the fall in commodity prices and saddled with huge debts taken on during boom years.

In February, Mr Cutifani unveiled a turnaround plan that involved selling or shutting dozens of mines to refocus the company around three core products: copper, De Beers and, crucially, platinum, which PIC is hoping to convince him to jettison.

Anglo is the largest producer of platinum in the world and employs more than 52,000 workers in South Africa. Sources said it was unlikely Mr Cutifani would part with the division. Anglo’s stock has come roaring back as the price of some products, such as coal, has recovered, and fears over Anglo’s survival have faded. Since hitting a low of 221p in January, the shares have more than tripled in value to 857p.

But Mr Cutifani is finding it hard to deliver on his promise to slash debt by selling assets. Several auctions have drawn tepid interest. He said last month he would consider packaging a group of assets together, such as its Kumba Iron Ore and the domestic and export coal divisions, to “create a new type of entity in South Africa”. Mr Cutifani is understood to prefer selling these rather than spinning them off.

Anglo has also been testing the market with its Australian coal assets, putting its entire business on the continent up for sale.

The Times