Anglo CEO [Cynthia Carroll] Doubles Down on New Mines Amid Falling Demand – by Jeremy Kahn (Bloomberg Markets Magazine – September 2012)

Driving northeast from Santiago, the road corkscrews toward the shark’s-grin skyline of the Andes Mountains. In winter, Santiago’s smart set plies this route, heading for virgin-powder days and pisco-sour nights at La Parva ski resort. Most have no inkling that in a high mountain valley just over the ridgeline, excavators the size of houses have sculpted the mountainside into a steeply terraced pit 1,800 feet deep, Bloomberg Markets magazine reports in its September issue.

This is Los Bronces, one of the world’s richest copper mines. Anglo American Plc (AAL), the London-based company that owns Los Bronces, spent $2.8 billion from 2007 to 2011 to double the size of the mine. And Los Bronces is just one of four megaprojects that Anglo Chief Executive Officer Cynthia Carroll has initiated or pushed through construction since she took over in 2007 — each representing a wager in excess of $1 billion on the continued rise of China, India and other emerging markets.

Los Bronces is also at the center of a legal battle between Anglo and Codelco, the Chilean state-owned mining company. The dispute — over whether Anglo can block Codelco from exercising an option to buy half of Anglo’s Chilean subsidiary — has spooked Anglo investors and weighed on the company’s share price, which dropped more than 15 percent from the time the controversy erupted in October to August 8.

Chile is just one trouble spot for Anglo American, which took in revenue of $31 billion last year from mining metals and minerals in more than 30 countries. Anglo also owns a 45 percent stake in diamond giant De Beers — and has recently agreed to increase that stake to 85 percent.

Share Swoon

Anglo has spent or authorized spending of $21.7 billion in the past five years to ramp up production while simultaneously cutting billions in costs. Yet on August 8, Anglo’s shares traded at nearly 20 percent less than when Carroll became CEO and at 45 percent below their May 2008 peak.

Anglo angered shareholders by suspending its 2009 dividend rather than delay capital spending on Carroll’s four megaprojects: Los Bronces, nickel and iron mines in Brazil and an iron mine in South Africa. While the dividend has been restored, the stock has been hurt by the Codelco fight and by cost overruns and delays in Brazil. Profits in Anglo’s platinum mining division have fallen sharply. Most important, China’s economic growth has slackened, calling into question Carroll’s big bets and pushing down profits.

On July 27, Anglo announced that first-half earnings fell 46 percent to $3.7 billion. That day, the company’s shares fell 3.6 percent.

Merger Pressure

With Anglo’s stock in a swoon, the proposed merger of Swiss commodities trader Glencore International Plc (GLEN) with mining powerhouse Xstrata Plc (XTA), announced in February, had analysts speculating that Anglo might be ripe for a takeover. In 2009, the company rebuffed a bid from Xstrata. “It’s like a game of chess,” says Doug Blatch, head of equity trading at Investec Asset Management in South Africa. “It’s all about who makes the next move.”

Blatch cautions that Anglo’s underperforming business units and weakening demand from China make a takeover less likely than it seemed in February. Yet, he says, Anglo’s low valuation could make it a tempting target. Its market capitalization in mid-July was less than half that of London-based rival Rio Tinto Plc (RIO) and less than a third that of Melbourne-based BHP Billiton Ltd. (BHP)

Anglo isn’t interested in the merger speculation, says Carroll, 55, in her office with views of Big Ben and Whitehall in London.


“We’re not consumed with anticipation around Glencore- Xstrata,” she says, adding that the merger will not reshape the mining industry or affect Anglo’s competitiveness. “I don’t think it makes any difference whatsoever.”

Carroll’s appointment in 2007 shattered multiple glass ceilings at Anglo. She was the first woman, the first non-South African and the first person from outside the company’s own ranks to occupy Anglo’s top post. Born in Princeton, New Jersey, Carroll moved to Anglo after almost two decades at Canadian aluminum manufacturer Alcan Inc., where the mother of four rose to become president of the company’s primary metals group, a business with $10 billion in revenue and operations in 21 countries. She built and ran aluminum smelters, oversaw ingot sales and sold smelting technology.

Carroll holds bachelor’s and master’s degrees in geology, and she spent five years prospecting for oil and gas for petroleum company Amoco Corp. before enrolling in Harvard University’s MBA program in 1987.

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