SUPPLY disruption as seen in the underperformance of mineral deliveries from South Africa was “the new normal”, the Financial Mail quoted Anglo American CEO Duncan Wanblad as having said.
Commenting last month during the Financial Times Mining Summit, Wanblad said that the problems experienced by Transnet, the government-owned rail and ports company, was an example of many types of disruption in other jurisdictions where the group operated.
“For the industry, disruption is the new normal,” he said. Chile, where Anglo operates the Los Bronces copper mine, recently adjusted its royalty bill such that the effective tax rate increased to between 40% to 45% from 38% (including dividend tax).
While companies like Anglo have stability agreements that protect the status quo, Chile’s fiscal changes is another example of the increasing difficulty mining firms are facing securing supply, especially in the battery metals to which Anglo is now pointed. “Supply of these minerals is severely constrained and this is pretty much global, and not in any one country, and not just in developing countries,” said Wanblad.
Wanblad has recently held meetings with senior figures at Transnet and government regarding potential long-term fixes to mineral delivery problems that include vandalism, corruption and crime, as well as spare parts supply problems.
“Quite a lot of work still needs to be done in improving capacity of the line and we are doing that with department of enterprises as well as the Minerals Council,” Wanblad said. The Minerals Council said last month that a strike at Transnet would contribute towards R50bn in annualised revenue losses for mining as a result of poor infrastructure – 43% more than the R35bn last year.
Then council also said it was disappointed to see no mention of infrastructure public/private partnership in the National Treasury’s mini-budget.
Despite minerals supply problems, analysts rate Anglo American highly relative to its peer group. Goldman Sachs rates the UK group as having the best prospects for growth of all diversified miners in its European coverage.
Anglo’s copper production is set to grow 50% thanks to the recently commissioned Quellaveco project in Peru. There’s also a shift in production from bulk materials such as iron ore and coal – which comprised half of Ebitda in 2010 – to metals used in green mobility.
“We view this as a positive catalyst,” said the bank which has tipped Anglo for a rerating as Quellaveco kicks in. Minerals like iron ore are heavily exposed to global property and construction whereas green demand and decarbonising technologies are set to consume significant amounts of copper, nickel and platinum group metals.