Australian mining veteran Cutifani to head Anglo

LONDON Tue Jan 8, 2013 12:41pm GMT

Mark Cutifani, CEO of Anglogold Ashanti, speaks during an annual African mining conference in Cape Town, February 7, 2012. REUTERS/Mark Wessels

Mark Cutifani, CEO of Anglogold Ashanti, speaks during an annual African mining conference in Cape Town, February 7, 2012.

Credit: Reuters/Mark Wessels

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LONDON (Reuters) - Australian mining executive Mark Cutifani, a one-time coal miner, has been appointed chief executive of Anglo American, taking on what analysts and investors say is one of the toughest jobs in the business.

Cutifani, who will step down as chief executive of Johannesburg-based AngloGold in March, had been one of several outsiders in the running for the top job at Anglo after Cynthia Carroll quit in October. He was named as a frontrunner over the weekend.

Shares in Anglo, which have underperformed the sector by almost 20 percent since the start of last year due to strikes, delays and cost overruns, were up more than 2 percent in both London and Johannesburg, as investors welcomed a move many hope will herald a review of its underperforming assets and a restructuring of the portfolio.

Cutifani, a prominent figure in South African mining after more than five years at the helm of AngloGold, will be the first Anglo chief executive with hands-on experience since the company was founded almost a century ago, having worked mining shifts in Australia while he studied engineering.

"I think his appointment is, at the very least, good, based on his reputation - and it also has the merit of being decided on pretty quickly," one of Anglo's 20 largest investors said.

"The pros and cons of geographical experience are far less important than finding a strong and experienced candidate, which would appear to be the case with Mark."

Another of Anglo's top 20 shareholders said Cutifani was a "reasonable appointment - external and with plenty of South African experience".

Cutifani, who takes over at Anglo on April 3, gave little detail on his plans for a group that has struggled in recent years with languishing shares, restive South African unions and budget blow-outs at a key Brazilian project.

He hinted at a review of Anglo's portfolio and said he would participate in an annual strategy review in July after three months at the helm, but declined to comment on key details, including whether he might consider splitting off assets such as Anglo's South African operations.

At AngloGold, he never excluded a spin-off of the group's South African operations and did not shy away from complex tasks including increasing exposure to the spot gold price by winding down a loss-making hedge book that could have sunk the company at the height of the crisis.

Anglo, like many of its peers, trades at a discount to the sum of its parts and has long been considered a break-up target. Analysts, who welcomed a faster-than-expected appointment, said an imminent, radical push from the new arrival was unlikely.

"It takes time... before you start to see benefits, in platinum in particular - this is a three-year job, not a one-year job. It is not a simple switch, or Anglo would have done it," analyst Des Kilalea at RBC Capital Markets said.

SOUTH AFRICAN CHALLENGES

Cutifani, a 54-year-old, straight-talking father of seven, will be only the second non-South African to run Anglo. But it was Cutifani's South African mining credentials - specifically five years at the helm of Johannesburg-based AngloGold - that were critical for the group when considering his appointment.

The only mining chief executive to attend a mass memorial for striking miners shot during unrest in South Africa last year, he was named head of the country's Chamber of Mines in November. Anglo chairman John Parker said the country's government had responded "positively" to the appointment.

"Cutifani has very strong relations with labour, the various stakeholders," said Lesiba Seshoka, spokesman for South Africa's National Union of Mineworkers, adding the union would still have preferred a "previously disadvantaged South African".

Comments from workers in the smaller, more radical and potentially more problematic AMCU union, however, were less conciliatory, and tensions remain high in the settlements around South Africa's largest platinum mines.

"We need (Carroll) back. She is not only interested in profits, she also cares about the working class," winch operator Evans Ramokga, 29, an AMCU recruiter and employee of Anglo's platinum arm, Amplats, told Reuters in Rustenburg.

Anglo, for which South Africa still accounts for more than half its forecast earnings, has battled combative unions and faces a year of restructuring at its platinum arm. One in four South Africans are unemployed and general elections are due in 2014.

Cutifani takes over just as Anglo prepares to unveil plans later this month for Amplats. The world's largest producer of the precious metal has been battered by the wave of strikes that hit the South African industry last year, as well as escalating costs and weak European demand.

South Africa will not, however, be the only item on the to-do list for Cutifani. His Brazilian experience will be welcomed as Anglo tackles problems at its flagship Minas Rio iron ore project.

Minas Rio, a 2008 deal which aimed to diversify the group's operations, has become notorious as a top of the cycle acquisition that could now cost well over three times the original estimate to develop.

Cutifani ran AngloGold from 2007, when he was plucked from Canadian mining group Inco, now part of Brazil's Vale. Despite facing falling production along with much of the rest of the sector, he turned the gold miner into one of the most efficient in the industry, boosted returns on capital, and introduced quarterly dividends.

AngloGold said that until Cutifani takes over, its chief financial officer and technical development head would act as interim chief executives.

Cutifani will receive a 1.2 million pounds ($1.9 million) basic salary, as well as bonuses tied to earnings per share, plus some 2.4 million pounds of compensation for loss of incentives on leaving AngloGold. He will be required to invest in Anglo shares to the value of twice his basic salary within five years.

(Additional reporting by Sinead Cruise in London, Sherilee Lakmidas and Agnieszka Flak in Johannesburg and Ed Stoddard in Rustenburg; Editing by Greg Mahlich, Will Waterman and Anna Willard)

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