Cutifani says Anglo won't quit SA

Some investors and analysts are concerned about the unsettled and violent nature of labour relations at Anglo's South African operations along with ballooning costs‚ power constraints‚ and political and regulatory uncertainty.

In his maiden address to Anglo shareholders at the company's annual general meeting in London last week Cutifani said South Africa remained important to Anglo.

"Our share price is languishing compared with our peers and we are not being rewarded for the potential we have embedded in the asset portfolio‚" he said.

"In that context‚ let me say that I recognise that South Africa remains critical to our shareholder value proposition. Likewise‚ we remain important to South Africa's longer-term development prospects," he said.

At a function to mark his departure as AngloGold Ashanti's chief executive last month‚ Mineral Resources Minister Susan Shabangu sounded a warning about any thoughts Anglo might have about withdrawing from South Africa.

"Mark‚ this Anglo American plc‚ it's ours. It's a South African company‚" she said. "We hope you'll make sure that it remains South African."

Shabangu launched an unprecedented attack on Anglo's 80%-held subsidiary‚ Anglo American Platinum (Amplats)‚ this year after it proposed retrenching 14‚000 workers and shutting three shafts to restore profitability and take excess platinum off an over-supplied market.

Some analysts want Anglo to divest

During her tenure as Anglo's chief executive‚ Cynthia Carroll was repeatedly quizzed by analysts and investors about its high exposure to South Africa‚ with some critics calling for the company to exit the country. Cutifani officially replaced her at Anglo on 3 April.

Gold companies with assets in South Africa have come under pressure to split their international assets from those in this country‚ with Gold Fields becoming the first to do so by unbundling three labour-intensive‚ deep-level mines in South Africa into a separately listed company‚ Sibanye Gold‚ in February this year.

The hedge fund owned by US billionaire John Paulson‚ which holds 7% of AngloGold‚ estimated that the gold miner's shares could increase in value by up to 68% if it split its mines into South African and international businesses.

Investors are believed to be watching Cutifani's first few months at Anglo closely‚ given the volatile global commodities markets.

"Anglo‚ like other miners‚ has seen tremendous pressure on its share price‚ given poor investor sentiment towards the metals and mining sector‚" Macquarie Securities said. "With numerous challenges and opportunities in front of him‚ we believe investor sentiment towards Anglo will increasingly hang on Cutifani's strategy for the company."

Streamlining portfolio

Anglo had made progress in streamlining its portfolio‚ selling a number of assets including a stake in AngloGold Ashanti and paper group Mondi. It also merged its construction materials business with that of Lafarge to create a new‚ listed entity.

"While many things have been achieved‚ we cannot continue to do business as usual‚" Cutifani warned.

Anglo's high level of exposure to South Africa relative to its peers, along with the challenges of completing its Minas Rio iron ore project in Brazil, were among the factors that made the company a less compelling investment option‚ UBS Investment said last week.

"We expect Cutifani to focus on turning around the under-performing assets in the group‚ to undertake further cost-cutting exercises and to reassess the portfolio of commodities‚" UBS said.

One of Cutifani's first tasks at Anglo will be overseeing a detailed strategic review of the company over the next three months.

"As a major diversified company‚ we need a more focused articulation of the value proposition that will guide our strategic position‚" he said.

"The review will scrutinise capital allocation and, where projects do not meet investment hurdles‚ cash will be returned to shareholders‚" he said.

"We will be more open to joint ventures where we can partner with others to tap broader operating or other experiences along with lowering our incremental capital risk on specific projects‚" he said.

A lack of capital discipline and focus on returns contributed to "the difficult issues we have seen in the industry over the last five years". This sounds similar to the approach Cutifani took in turning around the fortunes of AngloGold Ashanti from 2007.

Analysts have suggested that Anglo could take a further write-down on the Minas Rio project after impairing it by US$4bn earlier this year‚ with a view to bringing in a partner at the mine.

Costs on the project have roughly trebled to US$8.8bn.