Anglo American is not spinning off problematic South African assets

A Caterpillar dumper truck drives in the iron ore excavation pit at the Sishen open cast mine, operated by Kumba Iron Ore. File: Bloomberg

A Caterpillar dumper truck drives in the iron ore excavation pit at the Sishen open cast mine, operated by Kumba Iron Ore. File: Bloomberg

Published Feb 23, 2024


The Anglo American board is fully behind the restructuring of its operations under Anglo American Platinum and Kumba Iron Ore, although the diversified resources miner was not inclined to separating the problematic South Africa companies from its other global units.

As many as 490 employees will likely be laid off at Kumba Iron Ore, while an additional 3 700 could also be retrenched from Anglo Platinum as the South African operating companies battle electricity, port and rail bottlenecks as well as suppressed platinum group metals (PGM) prices.

“Those South African announcements follow a number of months of planning (and) the need to simplify our portfolio in order to be able to allocate capital we have. The board is fully behind all these medium-term and long-term imperatives,” Anglo American chairperson Stuart Chambers said yesterday during a results briefing of the company.

There has been speculation over the past few weeks that Anglo Platinum could be considering a split of its South African and southern African businesses – including operations in Zimbabwe – from the rest of the diversified entity. South Africa has been particularly challenging for Anglo American, which faces power supply constraints and inabilities to move ore, which had forced Kumba to cut its production for the next two years.

Anglo American CEO Duncan Wanblad said yesterday that the company was instead focusing on each asset and its importance to the diverse portfolio. He emphasised that despite the lay-offs and reduced production at Kumba Iron Ore, Anglo American had the ability to turn around the South African assets and to bump up their contribution to group productivity as before.

“I can’t remember that (South Africa from non-South African assets). I refer to what I said earlier today in terms of the whole portfolio review and the role of every asset in the portfolio,” he said.

“We have the capability of running assets extremely well in South Africa. The single largest cash contributor to Anglo portfolio today is Kumba and it is in South Africa,” added Wanblad.

Two years ago, the troubled PGM subsidiary for Anglo American had delivered a $7 billion (R132bn) contribution to the group’s Ebitda.

There has been growing criticism from labour unions that Anglo American is protecting lofty executive remuneration in South Africa at the expense of retrenchments. Greater worries in South Africa are centred on the possibility of a complete shutdown of mines if headwinds and the commodity price downturn persists.

“This (restructuring) is not a decision on South Africa versus the rest of the world; this is a decision on the commodity, on the asset itself, our ability to drive value out of those assets in terms of the complexity and the role of the particular asset in the portfolio in supporting clear strategic objectives,” said Wanblad.

Ebitda earnings in Anglo American for the interim period to end December 2023 amounted to $5.1bn, largely a reflection of weaker product prices. Profits attributable to shareholders amounted to $1.3bn, although operating profit for the period fell from $6.7bn to $3bn. It closed the period under review in a net debt position of $8.8bn after investing into value-adding growth amid weaker prices.

Depreciation and amortisation for the period firmed up by 3% to $1.3bn on account of “increased production alongside a higher carrying value” for the steel-making coal assets due to the impairment reversal recognised in 2022 and Quellaveco commencing commercial production in June 2023.

By the end of 2024, Anglo American expects to accrue operating expenditure savings of $1bn, with $1.6bn of capital “being taken out of the business through better effective deployment and clear focus” on every asset.

“The near term will remain challenging, but the long term is very bright. I remain excited about future of the industry and the company. We have the strategy and capabilities to make that happen,” said Wanblad.