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Anglo American names Cutifani as new CEO

by Paul Whitfield  |  Published January 8, 2013 at 2:26 PM
Anglo American plc has tapped Mark Cutifani to replace Cynthia Carroll as chief executive, handing the Australian former coal miner one of the toughest jobs in global mining.

Cutifani, who resigned as CEO of AngloGold Ashanti Ltd. to take up the new role, will find an in-box full of hard choices when he puts his feet under the desk on April 3.

"The new CEO comes with a proven track record and the confirmation of his appointment has contributed to a spike in the share price in early trade," noted analyst Richard Hunter, head of U.K. equities at Hargreaves Lansdown Stockbrokers Ltd. "Investors will be hoping that the fortunes of Anglo American can be revived after a period of relative underperformance."

One of Cutifani's most pressing tasks will be deciding what to do with Anglo American Platinum Ltd., Anglo American's problematic South African platinum mining business.

A review of the unit, commissioned by Carroll, will close later this month and is likely to show that there are no easy answers. Political pressure in South Africa, where Anglo American makes about half it earnings from platinum, iron ore and diamond mines, will make restructuring by closing Anglo American Platinum's worst mines difficult. A slump in platinum's value, high production costs at Anglo American Platinum's mines and problematic labor relations mean that buyers are not likely to be lining up with bids, while spinning off the unit would create a company with an uncertain future and unhappy shareholders.

Analysts at Citigroup Inc. recently predicted the global platinum market could remain oversupplied until 2015, meaning pressure on pricing is unlikely to dissipate in the short term.

Cutifani, who will remain with AngloGold until the end of March, has no shortage of South African experience. He has headed Johannesburg-based AngloGold since 2007 and is president of the South African Chamber of Mines, a key South African mining lobby group.

He is also a former head of CVRD Inco, now Vale Canada Ltd., the Canadian nickel subsidiary of Brazilian mining company Vale SA. Those Brazilian connections will come in handy in sorting out Anglo American's other major headache, the Minas-Rio iron ore project. Bought in 2008 at the top of the cycle, the project has experienced cost overruns and delays that have made it the poster boy for mining project blowouts. Some analysts are predicting the total cost could come in at about $14 billion, including capital expenditure of more than $8 billion. The project development costs had initially been forecast at $3.6 billion.

"I was heavily involved in copper, nickel, precious metals, including platinum, and pretty experienced to understand South America," Cutifani said on a conference call on Tuesday.

Any deals instigated by Cutifani are likely to wait until the completion of an annual strategic review, which is due in July. Cutifani suggested Tuesday that he would be involved with that review but gave few hints as to his plans.

Anglo American's new CEO oversaw a handful of deals during his time at AngloGold, including the sale of a 33.4% stake in Australia's Boddington Gold Mine to Newmont Mining Corp. for $1.1 billion in 2009. UBS advised AngloGold on that deal. Cutifani oversaw two acquisitions last year, with the purchases of the 50% AngloGold didn't already own in Brazil's Serra Grande gold mine for $220 million, on which UBS advised again, and a $335 million deal for South Africa's Mine Waste Solutions (Pty) Ltd, a mining recovery operation owned by First Uranium Corp.

Looming over anything that Cutifani does at Anglo American will be the prospect of a deal that many analysts see as the last megamerger on offer in the mining sector: the combination of Anglo American and Glencore International plc.

Glencore agreed to acquire Xstrata plc for $33 billion in shares, striking a deal for a company that bid for Anglo American in 2009. A new bid for Anglo American would plug an iron ore hole in Glencore's mining portfolio and thanks to the Xstrata takeover, much of the work assessing the merits of a combination has already been done. Xstrata claimed that a combination with Anglo American would deliver $1 billion of savings a year -- the wider combination with Glencore's powerful commodities trading arm might be even more compelling.

A megadeal is unlikely to be top of either Anglo American's or Glencore's priorities in the short term, but Cutifani could yet be Anglo American's latest and last CEO.

Shares in Anglo American traded late Tuesday in London at 2,038 pence ($32.74), up 37.5 pence, or just under 2% on their Monday close.

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Tags: Anglo American Platinum | Anglo American plc | AngloGold Ashanti Ltd. | Cynthia Carroll | Glencore International plc | Mark Cutifani | Minas-Rio iron ore | Vale Canada Ltd. | Xstrata plc

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