The new chief executive of mining giant Anglo American today conceded he had a major job on his hands rebooting a company that lagged its rivals during the boom years of mining.
Mark Cutifani, who four months ago described the company’s performance as “unacceptably poor”, outlined plans to cut costs and drive better returns from its remaining mines.
The Australian, who in April took over from Cynthia Carroll as Anglo’s third chief executive in 10 years, was spending the day with investors indicating how he was going to “reset” the business.
In terms of numbers, that means hitting a return on capital of over 15% by 2016, to be achieved by increasing operating profits to $3.5 billion (£2 billion). Today he said that while he and his team had identified most of those extra profits, there was a gap of about $500 million on top of the £3.5 billion for it to hit the 15% target.
He added that there were some assets he could look to sell but said: “The time to announce a sale is after you have done the deal.”
Companies across the sector have been struggling with the end of the so-called “supercycle” — a term coined in 2004 by the then boss of BHP, Chip Goodyear, for his prediction of a decade or more of sustained strong growth in minerals prices fuelled by Chinese and Indian economic development. In fact, the supercycle soon petered out, with prices flatlining since mid-2006.
Cutifani said he had spent the six months since his arrival going through more than 60 mining assets owned by the business, identifying both the potential risks and the opportunities for making a profit. “The good news is that the opportunities outweigh the risks.”
The investor day was delayed to today due to Nelson Mandela’s death. Anglo is a major South African producer — a factor seen by some analysts as a weakness due to the difficult nature of doing business in a country racked by labour relations problems. It is also becoming harder and more expensive to dig for resources, and many miners have been reducing their exposure there.