Dryblower on the Mission Impossible awaiting Cutifani

HEADS he loses, tails he loses. Whichever way the coin lands for Mark Cutifani as he takes on the mining world’s equivalent of Mission Impossible with the revival of Anglo American, Dryblower reckons he cannot win, even if he succeeds in restoring the finances of the battered giant.
Dryblower on the Mission Impossible awaiting Cutifani Dryblower on the Mission Impossible awaiting Cutifani Dryblower on the Mission Impossible awaiting Cutifani Dryblower on the Mission Impossible awaiting Cutifani Dryblower on the Mission Impossible awaiting Cutifani

 

Tim Treadgold

The problem looks like this – if Anglo continues to decline while Cutifani is in charge then he has obviously failed.

If the company improves, predators will move in for the kill.

At best, the newly appointed chief executive officer of the once great flag carrier of South African mining can get a higher share price for jaded investors when control passes to a new owner.

The merging Glencore-Xstrata is the obvious bidder for Anglo, having already made a proposal to the Anglo board, only to be rejected.

In hindsight, Anglo’s shareholders are probably wishing the deal had been done. At least they would have seen the installation of a management team more interested in profits than the soft social issues which seem to dominate thinking at a business trapped in its past.

To understand that point – and to get a better understanding of the prediction about Cutifani’s Mission Impossible – you need to look at Anglo’s history and what it looks like today.

Back in 1984 when Dryblower first met the late Harry Oppenheimer in Johannesburg, Anglo controlled a huge proportion of the South African economy, operating multiple mining operations from gold to diamonds, as well as paper production and banking.

The company was, in simple terms, an enormous fish in a very small bowl that was about to be smashed by the end of the apartheid era and the rise of the so-called Rainbow Nation, which is how the modern South Africa likes to market itself.

But, as any student of business knows, it is awfully difficult for a business which has grown fat and lazy in a protected environment to succeed outside that environment.

In a nutshell that was Anglo’s problem.

As control of its homeland passed from a white tribe to an assortment of black tribes the company embarked on its equivalent of the Great Trek, moving out of South Africa to try its hand in the global village.

By any measure, Anglo’s trek into a more competitive world, where personal contacts no longer fix problems or deliver deals, has been a failure.

Its corporate culture was misaligned, perhaps a result of decades in the phoney world of apartheid and perhaps because its way of doing business was not appropriate in other countries.

Today, Anglo is better at dealing with the world outside of South Africa but its roots remain embedded in a deeply troubled country where it has major investments in platinum, coal, iron ore and diamonds – the De Beers business built by Harry Oppenheimer’s father, Sir Ernest, before he created Anglo American in 1917 – a name chosen during the first world war to mask his German origins.

Somewhat amusingly, Anglo American was neither Anglo (British) nor American.

Cutifani inherits this mishmash of history and a company which remains tied in many ways to its South African roots.

This worries international investors because of the outbreak of troubles in its platinum mines, as much as problems in a number of overseas projects which appear to have suffered from the inability to export South African mining and management culture.

In Australia, Anglo is banging its corporate head against a government hell-bent on taxing the life out of mining, especially coal mining.

In Chile, he has a simmering dispute with the government of that country over a copper venture and in Brazil he has a major iron ore project which is spectacularly over-budget and behind schedule, sparking a suggestion from the investment bank, Barclays, that Cutifani simply walk away, saving the next $US5 billion in capital required to finish the job.

On the London stock market, Anglo shares have been in recovery mode over the past few months when it became known that a new CEO was on the way and the incumbent, Cynthia Carroll, was heading for the exit.

Testing the differences between Carroll and Cutifani will be the job of investors and the value they put on Anglo.

But, another more interesting way devised by Dryblower will be to listen to Cutifani’s early talks as Anglo CEO to judge whether he can sever the roots which tie the company to South Africa.

The starting point for that test is to look at the titles of the talks and speeches given by Carroll in her last 12 months in the top job.

They are dominated by social, safety and sustainability issues – not about making money, which is what investors outside South Africa want to hear.

“Anglo American’s safety journey”, a topic of one of Carroll’s talks last year makes the point and if not convinced try “Occupational health and primary health care”, or “Corporate citizenship for a new world”

These issues are undoubtedly important issues in Africa but not as important in the rest of the world where the roots are not entangled in apartheid era wrongs, or the ongoing attempts to right those wrongs.

For Cutifani, the job might actually boil down to this: stop running Anglo American as a grand experiment in social engineering and start running it as a business – or is that impossible without severing the roots by making a full exit from South Africa?

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