Bloomberg News

Anglo Calls in Platinum Veteran to End Slump as Miners Face Glut

July 19, 2012

Anglo American Plc (AAL) named Chris Griffith head of its platinum unit, the world’s largest producer of the metal, to confront sliding profits as a supply glut threatens to prolong weak prices for a further 18 months.

“He’s the guy who’s been parachuted in,” Dominic O’Kane, an analyst at London-based Liberum Capital said yesterday. Griffith, chief executive officer of Kumba Iron Ore Ltd. (KIO), the biggest contributor to Anglo’s earnings, has “gone to where he’s needed most.”

Anglo said yesterday Neville Nicolau was resigning as CEO of Anglo American Platinum Ltd. (AMS), or Amplats, “to pursue other interests” a day after the unit said first-half profit fell as much as 78 percent, pushing its stock to a three-year low. Cynthia Carroll, CEO of Anglo American, has asked 47-year-old Griffith to return to the platinum operation where he spent 18 years before leaving in May 2008 to run the iron-ore business.

“He’s done a great job at Kumba,” Carroll said in a telephone interview yesterday. Helped by iron-ore prices that more than doubled, Kumba gained 63 percent in Johannesburg trading under Griffith’s leadership. The platinum unit has slumped 65 percent over the same period.

The move prompts a chain of executive redeployments at London-based Anglo. Thermal-coal chief Norman Mbazima will take over from Griffith and be succeeded by Godfrey Gomwe, whose position as Anglo American South Africa head goes to Amplats executive Khanyisile Kweyama. The changes take effect Sept. 1.

Labor, Electricity

Griffith joins the platinum unit halfway through a review initiated in February, when Nicolau, bracing for continued weak prices, froze recruitment and cut spending. Platinum prices fell 23 percent in the last four years, eroding producers’ profit as labor and electricity costs rose by more than inflation in South Africa, the nation with the largest reserves of the metal.

“The market is pretty weak right now and it’s not looking like it’s going to improve much over the next, say, 6 to 12 months, or even 18 months,” Carroll said of the outlook for the metal yesterday. “We’re looking at our capital” and “overall underlying costs” as part of the review, she said.

Griffith must weigh changes to Anglo’s production, about 40 percent of global output, against a global platinum surplus Stanlib Collective Investments Ltd. fund manager Kobus Nell estimates at more than 500,000 ounces this year.

“The review is underway and is ongoing,” Carroll said yesterday. “We haven’t taken any decisions.” Reducing output may lead to higher expenses for Anglo, she said. “We take production out and everybody else gains. Our costs go up because we’ve got to cover those fixed costs.”

Nationalization Call

Carroll must also consider the impact any mine closures would have on job losses in the mining industry in South Africa, where Anglo has about 40 percent of its assets. The ruling African National Congress’s youth wing last year called for mines to be nationalized and the party is now considering windfall taxes in the nation, where about one in every four people are unemployed.

“The market demands production cuts that will drive Anglo American into confrontation with its most important host nation,” Liberum said July 13.

South Africa is concerned over job losses in the platinum industry, Mines Minister Susan Shabangu said last month. Aquarius Platinum Ltd. (AQP) the fourth-largest producer, suspended its Everest and Blue Ridge mines, as well as its Marikana venture with Anglo this year. Lonmin Plc (LMI), the third-largest producer is reviewing spending plans.

The latest evidence of the effect the industry slump is having on Amplats will come July 23, when the company reports half-year earnings. It may cut or halt its interim dividend, Liberum said yesterday.

To contact the reporter on this story: Carli Cooke in Johannesburg at clourens@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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