Anglo American CEO puts her new broom into action

If ever evidence were required that new Anglo CEO Cynthia Carroll means business then the shock departure of Ralph Havenstein, CEO of the group's 75% owned Anglo Platinum, is it. And writ in large letters. According to company wags, they hadn't a clue that Havenstein was quitting until 30 minutes before the words left the Carroll's mouth. "The days when being divisional head meant a job for life are definitely over," says a company insider. "Carroll has been warning repeatedly that sub-standard performances would be punished." The disagreement concerning Havenstein was principally over how to tackle Anglo Platinum's poor safety record. However, disaffection between Carroll and Havenstein dates back to February, when she ordered him to drop then Anglo Platinum chief financial officer Roeland van Kerckhoven from negotiations with the Department of Minerals & Energy. Havenstein's own description of his resignation barely hides the fracture. "I've been with the company now four years and it's gone reasonably well," he told Classic Business, a business radio programme. "But in the recent past we've had quite a few safety issues," he said, referring to 18 fatalities this year, of which 12 have been at Anglo Platinum's Rustenburg division alone. Havenstein then speaks of the safety issue "going to be done with a different sort of mandate" and that he "just felt it's time for someone new to actually take that challenge up". The different kind of mandate to which Havenstein refers is Carroll's insistence that Anglo Platinum shut down more mines, as it did at Rustenburg last month, in order to implement better safety protocols and the like. The Rustenburg division lost 15,000oz of planned production during its one-week shutdown. And the prospect of other mines in Anglo Platinum's stable doing the same contributed towards an expected 200,000oz shortfall in platinum output against budget this year. If that was to solve Anglo Platinum's ongoing safety problems it will only exacerbate another chink in its armoury – a runaway inability to meet production targets. In fact, Anglo Platinum hadn't managed to meet one production target with Havenstein in charge. And it's still hundreds of thousands of platinum ounces short of the 3,5m/year production that former CEO Barry Davison predicted in 2000 would be refined and sold by the company. Analysts are highly critical of shutting down mines in favour of safety, believing there's opportunity for harum-scarum safety worries as a means by which labour could avoid questions concerning productivity. "We really hope that this won't be used by some members of the Anglo Platinum production team as an excuse for lost blasts," says Steve Shepherd, an analyst at JPMorgan, in a recent note. For Carroll, she's put her reputation on the block from the onset. Critics believe her operational background in aluminium isn't like mining underground in South Africa. For example, compare the inhuman drone of an aluminium smelter, polished floors, aluminium matte bubbling safely out of reach in locked pot cells against the organised mayhem of an underground mine in South Africa. "The focus on safety is the right thing to do," says Heye Daun, a fund manager at the Old Mutual Group. "However, our concern is we'd have preferred a structured takeover, as with AngloGold Ashanti." Nick von Schirnding, Anglo American investor relations' officer in London, says: "Ralph's statements speak for themselves. In terms of Cynthia's agenda she has stated a number of times she'll be action orientated. Anglo is focused on achieving excellence in its financial, operating and safety standards." Havenstein says he's off to the Rugby World Cup in France and when he returns may consider returning to the chemical industry (Sasol?) from whence Anglo poached him four years ago. Interestingly, Havenstein's departure won't hold up Anglo Platinum's putative empowerment deal, said to involve multiple parties, including Northam Platinum. The deal, which is thought to be imminent, is being led by Norman Mbazima, who will be joint acting CEO at Anglo Platinum with Duncan Wanblad, the firm's projects manager. But there's the question of how Anglo Platinum intends finding a replacement for Havenstein, given that mining executive skills are in short supply in these days of commodity boom. Robin Mills, an operating stalwart at Anglo, had already retired but has promised to delay his sojourn to Ballito by a month. But there's a senior operating crisis at Anglo Platinum in the making. "The timing really isn't great," says Daun of the technical vacuum. Although a slightly spurious notion, a weakness in Anglo Platinum's share price could tempt Anglo American to buy more of the share. Anglo owns three-quarters of its platinum firm, effectively a division, and might consider gaining tighter access to its cash-generative centre. However, it would be a mistake to presume that Carroll played any significant part in Bobby Godsell's decision to leave AngloGold Ashanti. The word is that Godsell has wanted to leave for many months, possibly years. Anglo owns 42% of AngloGold Ashanti and has much less influence on its board than at Anglo Platinum. In fact, AngloGold Ashanti harbours two men – Simon Thompson and Bill Nairn – who were surplus to requirements at Anglo American. In Russell Edey, AngloGold Ashanti also has a fiercely independent chairman. Speaking on CNBC Africa, Godsell declared himself fully involved in the vetting process that resulted in the appointment of the 48-year-old CVRD Inco COO Mark Cutifani. Carroll probably had much less to do with Godsell's departure, carefully described in the press announcement as a retirement. However, one must wonder why Cutifani, a well-established executive at CVRD, which is an aggressively growing diversified mining firm, would want to land with two full feet in AngloGold Ashanti. Remember, Anglo American has stated its intention of selling its remaining shares in AngloGold Ashanti over a two-year timeframe, of which more than six months have run. This divestment of Anglo American could involve a merger with another gold mining firm, a development that would certainly put the skids under Cutifani's best-laid plans. And although there's a two-year golden parachute for Cutifani, essentially guaranteeing financial security, he could find himself out of a job. Interestingly, Edey says AngloGold Ashanti ought to have its future settled this year. Excluding December as a quiet month, that gives Anglo American four months. Could it be Anglo and AngloGold Ashanti have an entente cordiale concerning the divestment of the shares – that they won't be posited with a gold company rival, favouring instead a gentle disbursement to the market? "My guess is that the shares will probably be gradually sold into the market," says Brenton Saunders, an analyst at Craton Capital. It's also thought such a sell down – equal currently to R34,7bn (US$4,97bn) – would have some time mechanism governing sales. It's not an insubstantial amount of shares from one gold company, but it's thought there's no obvious buyer from among the gold majors ready to take those shares. The departure of Godsell is surely the end of an era. He's the last of a board that included Kelvin Williams, Jonathan Best and Dave Hodgson – individuals who took Anglo American's Gold & Uranium Division and spun it out in Johannesburg and then listed it in New York. As a core team, technical/mining skills weren't paramount. The only miner – the likeable, no-nonsense Hodgson – took the strain because Godsell and Williams were liberal arts students; Best is a CA. For all that, the company now trades on a multiple on a par with the best of international gold miners, it's completed its empowerment deal and it's fully entrenched in new offices in Johannesburg. Godsell goes with blessings on his philosophical head, leaving behind a younger board with stronger technical leanings. Just what's needed in a new era when improving cost structures and developing mines may become the defining feature of the commodity bull run.