At this link is an interview with Anglo American’s Mark Cutifani on the past progress and promised future performance of Anglo American. His message: we will get there, with there being a 15% return on capital employed (ROCE).
They did not achieve this and in fact fell from 11% to 10%. Reasons include the strike on the platinum mines in South Africa, the fact that of 69 assets, some 30 are not contributing to profit, and a fall in the price of many commodities they mine. Ultimately Anglo seeks a debt load of no more than $15M. I wonder what their closure cost fund is by comparison. May be reduced by selling those mines with large closure costs on the books.
Cutifani was quick to point out that Anglo is looking to sell the underperforming assets: mines not making a profit, or mines that need more capital than Anglo is prepared to invest. Seems there is no end of companies looking to buy. These past two weeks I have been touched (not involved) in mining projects where the current owners are looking to sell and new companies and investor groups looking to buy. Hope they do their due diligence. For I cannot understand why any sane person would purchase these “assets.” As one consultant confided to me: “They have too much spare cash and too big a self-confidence ego.”
Still I would rather park my spare cash with Cutifani and his obvious intellect and drive than some of the prospective purchasers I have met recently.
The interview is full of statistics. Listen, write them down, and decide if you want to invest in Anglo American.
Not a great indicator of investment performance, but still a great statistic is the 32% reduction in accidents and the 60% reduction in fatalities. Albeit three people died, which is a remarkable safety record if you think of past days. The interviewer noted that with 20,000 on strike for five months in South Africa it is almost inevitable the safety number increase. Cutifani countered with more detailed statistics that show this is not the case: in practice the reduction is 20 to 30% if those on strike are accounted for.
In short Cutifani emphasizes: we are getting the basics right. This will still take a lot of change–change many may not like–except the investors. Are you one of them?