'We will fix broken Anglo'

The whittling down of the Anglo American empire, founded at the start of the 20th century, has been one of the most riveting corporate tales of the past decade, with the South African mining company now set to own just 16 operations - from close to 70 just three years ago.

The radical transformation of the company, which once had a foot in almost every sector of the economy, has been fast-tracked by the collapse in commodity prices in the second half of last year as global growth concerns, in particular those of China, weighed on sentiment.

Until Anglo's investor day in December, the company was expected to reduce the number of operations to 37, but the plunging prices of metals such as iron ore and copper has triggered a bigger cull, including the sale of Kumba Iron Ore.

In an interview with Business Times, Anglo CEO Mark Cutifani said the board knew it had to move fast because of market conditions and a drop in sales at its diamond operation, De Beers.

There is no doubt Minas Rio was a mistake. We paid too much for the resource and we did not deliver

"The decision was clearly tough ... the difficulty in that time was that we had already seen De Beers's sales position, it was pretty negative."

Anglo American was founded in 1917 by Ernest Oppenheimer to initially take advantage of the gold boom on the Witwatersrand.

It is South Africa's most iconic corporation, but over the past decade its star has faded because of bad managerial decisions and the end of the commodity super-cycle.

At the peak of the cycle - before the collapse of US investment bank Lehman Bros sparked the international credit crisis - then-CEO Cynthia Carroll bought Brazilian iron ore project Minas Rio.

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The decision is considered to have been the company's worst and a major contributor to Anglo's debt struggles.

"There is no doubt it was a mistake. We paid too much for the resource and we did not deliver," said Cutifani.

Anglo bought the project for $5-billion in 2007 and spent $8.3-billion building it.

The price of iron ore had dropped to less than a quarter of its 2011 peak by the end of last year because of a supply glut.

Cutifani said the current management team would not make a similar mistake.

Transforming the company into a great mining house again would take between three to five years.

"For us, peering back, stripping it back to the core, getting it positioned in the right way, we will rebuild it and it will take time," he said.

Although Anglo is now concentrating on three commodities - platinum, diamonds and copper - Cutifani said the company could exploit any gold prospects that may be associated with its copper assets.

For example, the company intends mining copper in Papua New Guinea, where a gold and minerals boom has been under way since the '70s.

Unlike Africa, in South America and South East Asia, gold and copper deposits quite often lie close together.

"Having gold with our copper would be very well regarded," said Cutifani.

The gold price has held up much better than the prices of other metals, which have plummeted on low growth concerns. Gold, which has resumed its status as a safe haven, has gained more than 15% since mid-December last year.

The discovery of gold would mark a return to the industry for the diversified mining company, which, until it started divesting in 2006, owned Africa's gold mining giant, AngloGold Ashanti.

Cutifani insisted, however, that the company would focus on platinum, diamonds and copper.

"We won't do anything to step out in the next couple of years while we are doing the restructuring."

Proponents of transformation in the mining industry have called for the country to take advantage of Anglo's restructuring process, using the juggernaut as the basis to correct empowerment errors of the past.

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The company was criticised heavily for selling some of its platinum assets to Sibanye Gold, which is led by Neal Froneman, last year.

Anglo American is hoping to sell off 10 assets by the first half year.

In choosing a buyer for its South African assets, the company had to be commercial, further BEE and make a success of the ongoing business as well as commit to social labour plans, said Cutifani.

Although many perceive Cutifani to be abrasive, he said he hoped to leave the company known as the person who made the necessary tough decisions.

"By the time I am finished ... I'd much prefer that to be said of me than that he was a wimp and didn't" make the tough decisions.

After reaching their peak in June 2008, Anglo American's shares plunged more than 90% to a January 20 low.

But since the beginning of February, the stock has rallied, gaining about 54% to its Friday close of R95.92.

Wayne McCurrie, an analyst at Momentum Wealth, said Cutifani had placed Anglo American in a better position based on the current economic climate. He said there was no doubt that he would have to change his plans again if the economy changed.

mtonganal@sundaytimes.co.za