London, England — 29 October 2012 – Anglo American plc’s replacement for Cynthia Carroll, the mining giant’s departing chief executive officer, will have to confront the company’s unprofitable platinum unit as the most pressing challenge.
“Platinum is the single-biggest issue,” Des Kilalea, an analyst at RBC Capital Markets, said by phone from here. “It’s got too many risks that global investors don’t like, including deep-level mining, very high labour component of costs, and there’s strong and quite well organised unions, political and empowerment issues.”
Bloomberg News reports that chairman John Parker has begun a global search for a replacement for Princeton, New Jersey-born Carroll, 55, who said she would stay on until Anglo American finds her successor. Anglo’s market value has slumped by about US$14 billion in Carroll’s more than five years as the company’s first woman, external hire and non-South African CEO.
Carroll’s replacement may have to consider giving Anglo’s 77% stake in Amplats to shareholders, said Matt Brenzel, an analyst at Cadiz Financial Services Group in Cape Town.
“It’s a fairly elegant solution to quite a complex problem. Platinum will be the most pressing issue.”
The platinum unit’s poor performance has weighed on Anglo’s stock, down 19% this year in London. BHP Billiton, the largest mining company, has gained 5.5%, while Xstrata plc has advanced 2% and Vale SA has lost 15%.
“Anglo has had this mentality that platinum is core to the business, that, because it is the biggest producer in the sector, it made sense to keep it,” Brenzel said. “But the market hasn’t played ball.”
Aquarius Platinum shut most of its mines this year while Lonmin plc, the third-largest producer, has curbed spending plans and may hold a rights offer, according to Societe Generale SA and SBG Securities Ltd.
Parker may need six months to find Carroll’s replacement, RBC said yesterday, and whoever he homes in on will have more to contend with than just platinum. Anglo said this week it is a preparing a new cost estimate for its biggest project, the Minas-Rio iron ore venture in Brazil. The US$5.8 billion project’s projected costs have already been increased at least four times.
Alex Vanselow, a former BHP chief financial officer, “seems the most obvious candidate,” Deutsche Bank AG said in a note to clients. While Chris Griffith, who was made CEO of Amplats in July, is the strongest potential internal successor, his critical new role may remove him from contention, the bank said.
Xstrata Plc’s CEO Mick Davis, set to leave after Glencore International Plc’c proposed US$33 billion takeover, may be a candidate, John Meyer, a Fairfax IS Plc analyst in London, said in an interview on Bloomberg Television.
Mark Cutifani, CEO of AngloGold Ashanti, and Doug Ritchie, strategy chief at Rio Tinto plc, are also candidates for Carroll’s job, the Financial Times suggested without citing anyone.
“On the search process, which will start from today, our aim will be to secure the best candidate,” Parker said on a conference call yesterday. “I wouldn’t really want to comment on any individual, except I think it wouldn’t be unreasonable for me to say that we couldn’t afford Mick Davis.”
Source: Bloomberg News. For more information, click here.