Anglo 'outsider' tots up her balance sheet

Perhaps the bravest move in the recent history of Anglo American's near 100-year existence was to suspend dividends in 2009 and continue its capital expenditure programmes.

It was the first time since World War 2 that the mining house founded by Ernest Oppenheimer had not met even the lowest expectations of its investors.

The person courageous enough to make the call was Cynthia Carroll, which was fitting, seeing as her 2007 appointment had broken with all manner of traditions at Anglo.

She was the first woman CEO and an American, not steeped in its culture. She didn't fit the mould, wasn't part of the "old boys' establishment" that had steered the company from its headquarters at 44 Main Street in central Johannesburg and later its London headquarters.

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Carroll had been brought in to diversify and globalise Anglo. T he company had moved to London at the turn of the century and was eager to shed its conglomerate tag and define itself as just a mining house, albeit a diversified one.

"I was very much taken by the fact that it did have a long legacy, a long history and these South African roots," says Carroll in an interview from London with Business Times.

There wasn't a simple path to Anglo's diversification as, just a year after Carroll became CEO, the company was hit by the global financial crisis .

The effects are still being felt today. Commodity prices may have slightly recovered from the double hit of the recession and the eventual slowdown in Chinese demand a few seasons later, but they are still some way off their highs. Copper and platinum, Anglo's two biggest metals, account for slightly over a third of its revenue. Copper is roughly 40% off its 2011 high, and platinum is almost 60% off its 2007 peak.

Labour unrest also came to the fore, culminating in the 2012 Marikana massacre in which 34 mineworkers were killed.

Carroll recalls that she had one particularly important investor asking her whether it was time for Anglo to get out of South Africa, an inclination she opposed.

When the tide was going out in commodity markets, there was one Anglo investment that was particularly exposed, and Carroll was criticised for her decision to buy Brazilian iron-ore project Minas-Rio.

An analyst said she was buying assets when she should be selling as it was the top end of the super cycle.

But Carroll says the board was very aware that iron ore was missing from the group's portfolio - and Minas-Rio had already been looked at before she arrived.

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"What I worked on was to develop a portfolio that I certainly believed was focused on the highest-value-creating commodities," says Carroll.

'When she joined Anglo, the group had already missed the boat in many ways. BHP Billiton and Rio Tinto, and Brazil's Vale, had capitalised on China's demand for iron ore, copper and coal, buying cheap assets and reaping the benefit of the demand.

Anglo paid about $5.5-billion for Minas-Rio in two stages in 2007-08. To bring it to full production - which began in 2014 - it had to fork out $8.4-billion more, more than twice what was originally projected.

This triggered a debt spike, which is central to Anglo's strategy of reducing the number of assets in its portfolio and focusing on three commodities - diamonds, copper and platinum.

"We can all go on and on and I can tell you at the time we had Xstrata right behind us at the door ... Minas-Rio was the biggest undeveloped mine and I continue to believe that it will generate a lot of cash."

She says that at the time, under the circumstances, it was the right decision for Anglo, but with the benefit of hindsight it was not.

Carroll defends her record at the company, listing the fact that the group divested close to $10-billion in noncore assets. S he points out her acquisition of De Beers and the growth potential that deal continues to offer Anglo.

She says she recognised early on the benefits of pursuing the Oppenheimers' stake in De Beers. It was a unique asset to complement the company's portfolio, "something that nobody had or was likely to have. I saw that early on and I worked really hard to make it happen."

In 2011, Anglo bought the Oppenheimer family's 40% interest in De Beers for $5.1-billion, taking Anglo's shareholding in the world's leading diamond company to up to 85%.

Carroll's record at the helm of Anglo has often been criticised by the investment community, especially in the aftermath of her decision to suspend the dividend payment. There was only a 0.94% drop in the share price for the South African listing from the time she joined in 2007 to the time she left in 2012. Anglo's London listing, though, dropped 24% during the years she was CEO.

While it's a record that her detractors often raise, her safety drive received significant praise. Anglo suffered nearly 200 fatalities in the five years before Carroll joined. One of the first things she did when she came on board was to order a shutdown of Anglo Platinum's Rustenburg mine.

"I told Ralph Havenstein [CEO of Amplats at the time]: 'We are going to shut down Rustenburg.' And he says: 'We need to talk about it.' And I say: 'No, we are not in control, we need to shut it down and step back and assess where we are.' I think a lot of people were unhappy about that," says Carroll.

Havenstein resigned in August 2007.

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Carroll says that despite a number of employees and managers insisting that safety was improving and fatalities were coming down, she could see that this was not the c ase.

The pursuit of better safety standards did not earn her friends within Anglo or beyond. Carroll says she had to take a hard line with employees who were not prepared to change.

"I told people that I was not going to lead a company that was seeing loss of life on a continuous basis. First and foremost, we're there to protect people ... and that was for me the starting point. In addition to that I have always believed strongly that safety is the key indicator of the degree of discipline in an organisation. I have never seen a organisation that has poor safety and a great bottom-line performance."

She says she understood that shutting down the Rustenburg operation was not a sustainable approach, and that further steps needed to be taken.

The recent purchase by Indian billionaire Anil Agarwal of a 13% stake in Anglo has stirred speculation about the future of the mining house - and Carroll's role in it.

Carroll, a former executive at Canadian aluminium producer Alcan, was brought in by Agarwal's company Vedanta in September 2015 on its aluminium business. Vedanta maintains Carroll had no involvement in Agarwal's investment. She says she is no longer involved in Vedanta and left the company last month.

Carroll says she i s a great believer in Anglo , which could achieve a lot more in South Africa and globally. She remains a shareholder.