Research archive for AGL

There is big news this morning, the confirmation has come from, wait for it, AngloGold Ashanti first (for me anyhow), that Mark Cutifani was leaving. Check it out: AngloGold Ashanti Announces Departure of Mark Cutifani. This is sad for AngloGold Ashanti, but I think that this is a very positive development for Anglo American. Anglo American have a nice picture of Cutifani on the front page of the Anglo American website, cracking no more than a grin. The official Anglo release: Anglo American appoints Mark Cutifani as Chief Executive. I think that this is awesome news for Anglo. Anglo stock is up on the news, whilst AngloGold Ashanti is down. There will be a lot written about the skills of Cutifani, but I think the clincher was his no nonsense attitude to the reality that faced the company when he was at the helm. I do not think he will sugar coat anything.

Resources bore the brunt of the selling again yesterday, down a percent as Anglo closed in on territory last seen in October of 2009. There was a brief swoon down to 233.75 at the beginning of September, unfortunately we are close to that now. Prior to the period of great pity in 2008 when the stock was absolutely crushed along with all other equities globally, these levels are the same as 7 odd years ago in London. The stock first crossed 17 pounds sterling in September of 2005. We are now at 1699 pence. Sad face. Year to date however Anglo is down nearly 29 percent in London, whilst the FTSE is barely higher, nearly 2 percent up in a very tough year. In the same market, over five years, the FTSE is down 10 percent whilst Anglo American has lost 51.5 percent of their value.

The mine workers strike at Amplats is still not resolved, we have seen another extension of the offer from Amplats. The first return to work offer was tabled on the 27th of October, the talks had started with the workers, the company and the represented unions. There has since not been an extension, but according to the Anglo American Platinum update on 9th of November, workers were to return by 12 November, or the offer would lapse. There is a MiningMx story from last evening which suggests that the strike could actually end today: Amplats breaks 8-week strike with new offer.

Anglo American are taking a few body blows this morning. This was coming I guess, the company released a press release, giving us an update on (the) Minas-Rio iron ore project. Yech. I read a note that suggested that the Capex guidance was around more than 8 billion Dollars, which was near the top end of the range, hence the selloff. The wording is a bit strange: "the current indications are that capital expenditure for the project is unlikely to be less than the $8.0 billion upper end of the current range of analysts' expectations."

Platinum miners lost three quarters of a percent, Anglo American Platinum was offering returning to work once off payments, as well as loyalty payments to those that worked through the wildcat strike and a borrowing facility for those who wanted it, repayable over six months. And still, there is tension in Rustenburg, police are still maintaining their presence there. People try and predict who will be the next in line at Anglo American, Chris Griffiths was one name that I heard, Mick Davis was another. Although the chairman, John Parker, said outright that he is too expensive, and there is no love lost between the two as I understand it. I asked the question, do we need a South African to run what is essentially a non South African business.

Cynthia Carroll has decided enough is enough, and she is stepping down from Anglo American as CEO. The release is on the Anglo website, you can read the full announcement here: Cynthia Carroll to step down as Chief Executive of Anglo American. The response from twitter was, well that was about time, and at last. Not, she will be missed and what a loss for the company. Chairman John Parker was a little more flattering: "Cynthia's leadership has had a transformational impact on Anglo American. She developed a clear strategy, based on a highly attractive range of core commodities, and created a strong and unified culture and a streamlined organisation with a focus on operational performance."

This morning Anglo American released their production report for the third quarter ended 30 September 2012. I promise I am not being lazy here but the overview from the release really does summarize it all very well so I will do a copy paste and then we can analyze it in more detail.

The WSJ reported on Friday afternoon, Anglo Struggles to Extract Itself From Deep Hole. The story is short, but it highlights what we have said all along, the Brazilian iron ore project (which was supposed to have started already) is not turning out the way that the business wanted. As we understand it, Carroll brought the project to the board. And if that is the case, when the project eventually comes online in a couple of years time, at what cost? And where will the price be? When will the price of iron ore be at that time? And what will the demand picture look like? The more burning questions are closer to home however, what will Anglo American do with their stake in Anglo American Platinum? As the article points out, only two percent of Anglo American EBIT is contributed by Amplats. But as much as 25 percent of the parents value is made up by the number one platinum producer.

Anglo American have released their interim results this morning, and it looks like an earnings miss, the stock has sold off in a market that is moderately higher at the get go. I saw a brief interview with Cynthia Carroll on CNBC this morning, she was getting excited about controlling costs. But the facts are, as per the release, HALF YEAR FINANCIAL REPORT for the six months ended 30 June 2012: "Anglo American reported an operating profit of $3.7 billion, a 38% decrease. EBITDA decreased by 31% to $4.9 billion and underlying earnings decreased by 46% to $1.7 billion." Of course, because Anglo American has all the listed parts, we get to see quite a few of them over the last couple of weeks, before the actual number. And in fact, the biggest surprise for me (other than the delays at Minas-Rio and miss in earnings) is that Anglo have UPPED their stake in Kumba Iron Ore by 4.5 percent to 69.7 percent!

Lots of news coming from Anglo America over the last few days. First we had the Anglo Plats update which we already covered then we had an announcement yesterday afternoon indicating a big management shift.

This is kind of left field, I saw on a Google alert set for Anglo American that they had a permit suspended for power supply for their Brazilian Iron Ore project, Minas-Rio. Not good news at all really. But according to the Bloomberg story titled Anglo Has Power-Line Permit for Minas-Rio Project Suspended, Anglo have in their minds followed all the necessary rules and regulations when applying for the power. And apparently, from another source, the expectation is that Anglo will have the licence reinstated inside of the next two weeks. Or course the opposite would be disastrous. This is one of their key projects, and expected to be producing around 30 million tons of iron ore pellet feed annually, coming online at the end of next year. Power is key. We shall check this one out, but I suspect as a school friend of mine, who lives in Brazil said once, the number of regional and state taxes and mining regulations were many. So, some are suggesting that this might be local government versus state government and muscle flexing. Nice. Or not really nice.

Anglo American have released their full year numbers this morning and it looks like a comfortable beat to me. In fact Byron tells me that it was a beat. Good for them. Good for their shareholders and management who have had to battle the media and shareholder criticism, they must be feeling a whole lot better about life. The stock is up two percent plus here this morning. But with record results, their best ever, the stock is around 230 Rands away from the all time high. Go figure! I can see that the stock clocked 556 Rand in the second half of June 2008. The stock trades at 326.50 Rand a share. So, back then the stock was completely stretched, now it is very cheap.

And then possibly the most important company news of yesterday, on the local front that is, the Anglo American fourth quarter production report. This is for the quarter that ended December 31, and that wraps up their full year. Iron ore sparkled (it can't really sparkle, but the business division can), with Q4 2011 better by 5 percent when measured against Q4 2010. And two percent better than the prior quarter. Total output of 12,427 million tons for the quarter, mostly driven by the South African export market, which was up 7 percent. What is also pleasing is that the South American iron ore export market also increased significantly, up ten percent. The South African domestic market used to be bigger than South America, but there was a dramatic fall off in iron ore domestic market, that was down 28 percent. Byron is taking a detailed look at the big daddy of their Iron Ore assets, Kumba Iron ore, who released a trading update yesterday morning.

About the only local interesting company news was another announcement from Anglo American in their ongoing battle with Chilean state owned mining company, CODELCO. Refresher, if you needed one, remember we wrote about it last year when the news first surfaced in the middle of October, in a post titled Anglo American could be a forced seller of their premier copper asset. As you can see from the note that day, the option that CODELCO had indicated that they would exercise dates back to 1978. And when Anglo bought the asset, it bought the conditions too.

Anglo American released a statement last evening, this after a Chilean court blocked any further sales by Anglo American of their copper assets in Chile. Anglo American are going to oppose this ruling. From my simple reading of the matter, this is messy at best, and is going to last a long time. Reuters are reporting that Codelco are of the opinion that this could take as much as four years to resolve. In court for four years? That sounds like fighting talk to me. Codelco have outright said that they are going to exercise their right, come January next year, for 49 percent of the Anglo American Sur assets. The next question however, is the important one, if you were Mitsubishi, would you not walk away now? And say, nope, sorry, thanks for what looks like a good deal for you in the short term, but this looks messy. Would you? Because the thinking is that Codelco could only own 24.5 percent now, because Mitsubishi had agreed last week to buy the same amount for 5.4 billion Dollars. A deal is not a deal until the money is in the till right?