Mining

Kazakh miner nears endgame with chairman’s exit

23 Apr 2013

The hapless 3.8 bln-pound ENRC is losing its board boss and two directors. That further dents its reputation and value. The onus is now on the board to wring a decent price from the founders - if a mooted buyout appears. If no bid arrives, ENRC has a huge repair job to do.

This time the ENRC board has to show real mettle

19 Apr 2013

A possible bid led by one or more of the troubled Kazakh miner’s dominant shareholders could offer minorities a welcome exit. But there’s a serious information gap to cross. The cleanest way for the board to secure a robust asset valuation is to get an auction going.

End of an era for the Xstrata gravy train

16 Apr 2013

The miner’s outgoing CEO will get 14 mln stg for yielding the top job at the combined Glencore Xstrata, instead of serving out a six-month transition. Mick Davis is taking what’s contractually his. But pay for no work rankles. Investors and compliant boards share the blame.

Gold miners still look expensive

16 Apr 2013

It’s hard to see value in the sector despite shares being savaged. Miners’ earnings will be crushed as high costs meet falling prices. Management has few levers to pull. Gold’s peculiar dynamics mean that closing unprofitable mines may have only a muted effect on the market.

Why buy ENRC if its assets may soon be on the slab?

11 Apr 2013

The London-listed Kazakh miner is a regular bid-talk target. But buying it makes little sense if its assets can be bought later for less. Reports that Chairman Mehmet Dalman has threatened to resign may be wide of the mark. But ENRC has yet to present a convincing revival plan.

More resource transparency welcome, warts and all

10 Apr 2013

Forthcoming rules will require EU oil and mining companies to publish details of project-by-project dealings with governments. It will create extra work and may disadvantage Western producers. Still, the benefits of extra transparency should far outweigh the costs.

Kazakhmys and ENRC risks go further than governance

26 Mar 2013

Sharp falls in the stock price of London-listed ENRC and its 26 pct shareholder, Kazakhmys, may make the companies look cheap. But investors need to dig deep to see any value. ENRC’s iffy governance is only part of the problem. Operational and strategic questions are rife.

Glencore/Xstrata results herald tense integration

5 Mar 2013

Last year’s profit fell less at commodity trader Glencore than at mining merger partner Xstrata. Glencore’s trading arm provided a cushion as the metals cycle turned, while ambitious Xstrata had to take big writedowns. Expect a brutal “Glencorisation” of Xstrata’s culture.

Bumi shows that small print is well worth reading

22 Feb 2013

It’s easy to mock the list of “risk factors” in prospectuses. Lawyers rattle off every imaginable thing that could possibly go wrong. The long and deadpan list can be funny and oddly terrifying. But it can be valuable too. Many of the risks at Bumi were hiding in plain sight.

Bumi debacle teaches some all too basic lessons

22 Feb 2013

Most of the mess at the London-listed Indonesian coal miner could have been avoided if Nat Rothschild and his backers had followed what should be standard practices for risky investments. Breakingviews has a check-list for future purveyors of exotic deal structures.

Miners’ boards need a tune-up for austerity era

21 Feb 2013

Of the four big miners to change CEOs recently, only BHP Billiton managed to do it smoothly. The bosses may have messed up, but company boards are not blameless. They need to do better as the commodity cycle enters a new - and more challenging - phase.

Marius Kloppers will be hard act to follow at BHP

20 Feb 2013

The miner’s outgoing boss benefited from great assets, management discipline, a bull market, and some luck. BHP’s returns were solid under Kloppers, despite the financial crisis. His successor, Andrew Mackenzie, will stick to the formula, but he’ll need more luck to do as well.

Iron miners need to know when to quit digging

14 Feb 2013

Rio Tinto’s new boss, like his peers, is offering spending restraint. But the huge profit from fast growing Chinese demand for iron ore won’t last forever. For low-cost producers, the temptation is to dig, dig, dig. If everyone does the same, prices and profit could tumble.

Bumi shareholders should back incumbent board

13 Feb 2013

Competing plans to salvage value at the coal miner both have serious flaws. But current management, rather than Nat Rothschild, is best placed to achieve an all-important split with Indonesia’s Bakrie family. Once assured by a promised break fee, investors should offer support.

Polyus sale could leave gold deal bulls hanging

6 Feb 2013

Russian billionaire Mikhail Prokhorov’s potential exit from Polyus, the Siberian gold miner, has revived talk of a tie-up with fellow Russian producer Polymetal. An enlarged national player might please the Kremlin, but the industrial logic of gold mergers is weak.

Glencore Xstrata needs governance champ in chair

24 Jan 2013

The commodity trader’s board is already stuffed with operational expertise. CEO Ivan Glasenberg should resist the temptation to go for more of the same. The board needs a chairman with impeccable governance credentials. One former UK government minister fits the bill.

China’s role in Rio Tinto chief’s downfall

18 Jan 2013

Tom Albanese’s $38 bln Alcan deal was a bet China would use more aluminium and close down its unprofitable producers. Instead, it has propped them up, helping push prices down and the CEO out of his job. It’s a reminder that China’s state capitalism plays by different rules.

Rio’s snap succession makes bad news look worse

17 Jan 2013

The miner’s investors were expecting a big writedown, although maybe not $14 bln, including $3 bln on a 2011 African coal deal. But even though the new CEO, Rio iron ore chief Sam Walsh, is experienced and capable, the decision to replace Tom Albanese immediately looks rushed.

Anglo opts for high-risk, high-reward in platinum

15 Jan 2013

The embattled miner deserves credit. Its long-awaited platinum restructuring was more aggressive than expected. The task for the incoming CEO is to execute without more of the labour unrest that hit output in 2012. The shares’ subdued response suggests investors are rightly wary.

New Anglo boss needs free hand to make changes

8 Jan 2013

Mark Cutifani’s operational nous and South African experience make him a good choice to run Anglo American. But the miner’s incoming boss should set his own agenda, including examining a breakup. Anglo’s institutional inertia already threatens to undermine his authority.