AngloGold unfazed by flop, says Pityana

Saving FaceChair spins shareholders' rejection of proposed split as positive feedback and a vindication of leadership

"WE didn't lose face and it wasn't a debacle," says the chairman of AngloGold Ashanti, Sipho Pityana, after shareholders forced the company to dump its restructuring plan shortly after announcing it.

The plan would have seen AngloGold split into two companies, one handling its local assets and the other its offshore assets. It also involved raising R23.2-billion of capital by means of a rights issue.

It was given massive coverage in the media, with executives effusively punting it - how good it would be for investors, how many opportunities it would create, how much value it would unlock and so forth.

But shareholders didn't see it that way and another announcement said the plan had been shelved. Red faces all round, one might have supposed, but not according to Pityana.

If we'd read their initial statement carefully, he says, we would have seen that AngloGold was merely putting forward a proposal to shareholders, not making an announcement.

"We said 'this is what we are going to propose to shareholders', not 'this is what we're going to do'."

AngloGold half expected its shareholders to disagree with one or other aspect of the plan, either the capital-raising part or the restructuring. And so it came to pass. Pityana almost makes it sound like this was part of the plan as well.

Why weren't shareholders sounded out beforehand?

Because this would have made them insiders, he says. "We'd have been in breach of regulations because of prejudice to some shareholders. It wouldn't have been fair."

Could there not have been some form of engagement without violating insider trading regulations?

"That's a big debate. The important thing is that this was not a surprise, it was not something that was sprung on anybody. They [shareholders] reflected on it and they said that given market conditions, the capital raise certainly was not something they were prepared to consider at this stage."

AngloGold was not entirely surprised, he says. "We realised that the capital ask was a big number."

Far from losing face Pityana notes that "feedback from shareholders was also one of affirmation of the leadership of the company".

This is because "we have been quite engaging with them on where the company is going, and that we are reflecting on a much bigger strategy.

"So they know there is a fallback position that will continue to create value for them. So we didn't lose face in that sense."

A loss of face would have been if shareholders had been "so upset" that they questioned whether the company had the right leadership and demanded an annual general meeting to get rid of the board and management. Shareholders may not be calling for their heads just yet, but they have certainly questioned the timing of the, er, proposal.

"Timing is always a debatable issue," says Pityana. "Remember, the board doesn't always have to follow what shareholders say, because we have a fiduciary duty. If there is a point where we think that the survival of the company is dependent on us going out to the market and raising equity we have a legal obligation to do that, even if shareholders would be unhappy about it."

Was this a matter of survival?

"We are not in that space. So we wanted to canvass shareholders about doing it in a context where we were not under pressure to do it. So they have the liberty, the latitude, to exercise their right to say no. So they're not forced, if you like, to do it."

He agrees that this could change should the price of gold suddenly fall.

"There are things that are outside our control. If suddenly the gold price goes negative in a dramatic way we may be forced to go back and raise equity." And shareholders understand this? "Indeed."

They continue to have full confidence in management because, far from being a debacle or even a setback, what happened was actually a vindication of AngloGold's leadership, says the silver-tongued 55-year-old Pityana, showing why he was such an excellent choice as the successor to the more belligerent Tito Mboweni as chairman in February this year.

"It has been a vindication of management's leadership within a framework that shows a cognisance for shareholders."

By drastically diluting the value of their shares?

"Because we didn't take a decision and try to cajole them to follow a strategy that they were not sure about."

The company may not be under pressure from shareholders, but the government, in the form of Mineral and Petroleum Resources Minister Ngoako Ramatlhodi, is doing an awful lot of huffing and puffing about the mining industry's supposed lack of transformation and failure to meet the targets of the 2004 mining charter.

"Let's measure what has been done in the industry," says Pityana, "and then let's have a conversation."

He says he is pleased that the department has commissioned a proper audit "so that we talk from the same page. Let's take stock of what has been done since 2004."

He is confident that the audit will find that AngloGold has met all the targets and does not have anything to fear on that front. But this does not mean the minister's threats to review licences and revisit the mining charter with a view to setting new targets do not concern him.

"We're not an island. The environment in which we operate thrives on regulatory certainty, so it is important that there should be a proper conversation about what it is we're wanting to achieve.

"Any investor would want regulatory certainty. So any debate about a review of the mining charter and what it would entail would be a cause for concern. We have to get on top of that and create certainty.

"I would have thought the primary focus of government, given that we missed the commodity boom, given the crisis of investment in the sector, would be on growth in the mining sector and how it can contribute to the growth of the economy. That, for me, is pivotal.

"To the extent that we create uncertainty around the regulatory agenda, it creates a great deal of push-back from investors wanting to come to South Africa."

Is this what informed AngloGold's restructuring plan?

No, he says.

"That was not a response to regulatory uncertainty, it was about pursuing opportunities as we saw them."