Driving northeast from Santiago, the road corkscrews towards 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 pits about 550m deep, Bloomberg Markets magazine reports in its September issue.
This is Los Bronces, one of the world’s richest copper mines. Anglo American, the London based company that owns Los Bronces, spent USD 2.8 billion (ZAR 23 billion) from 2007 to 2011 to double the mine’s size.
And Los Bronces is just one of four megaprojects Anglo chief executive Cynthia Carroll has initiated or pushed through construction since she took over in 2007 each representing a wager in excess of USD 1 billion on the continued rise of China, India and other emerging markets.
Los Bronces is also at the centre 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% 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 USD 31 billion last year from mining metals and minerals in more than 30 countries.
Anglo also owns a 45% stake in diamond giant De Beers and has recently agreed to increase that stake to 85%. Anglo has spent or authorised spending of USD 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% less than when Carroll became chief executive and at 45% 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 SA.
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% to USD 3.7 billion. That day, the company’s shares fell 3.6%.
Mr Doug Blatch head of equity trading at Investec Asset Management in SA said that “It’s like a game of chess. It’s all about who makes the next move.”
Mr Blatch cautioned Anglo’s underperforming business units and weakening demand from China made a takeover less likely than it seemed in February.
Yet, Anglo’s low valuation could make it a tempting target, he said. Its market capitalisation in mid-July was less than half that of London based rival Rio Tinto and less than a third that of Melbourne based BHP Billiton. Anglo isn’t interested in the speculation, said Carroll, 55, in her office, with views of Big Ben and Whitehall in London.
Source - IOL CO ZA
(www.steelguru.com)
