Anglo Coal South Africa, a wholly owned subsidiary of Anglo American, has been recognised by the Global Business Coalition (GBC) on HIV/AIDS, Tuberculosis and Malaria for its pioneering workplace program focused on tackling HIV and AIDS in South Africa. Anglo American is South Africa’s leading private sector employer, with over 100,000 people employed at its operations.
The Business Excellence Award for Best Workplace Program will be presented to Ben Magara, CEO of Anglo Coal South Africa tomorrow night at an awards dinner in Washington D.C. The event will be attended by global health leaders including senior Obama administration officials and representatives from UNAIDS, The World Health Organisation (WHO) and The Global Fund.

HIV and AIDS is having a major impact on millions of lives in Southern Africa and Anglo Coal estimates that some 1,300 of its 9,300 employees in the region are currently infected with HIV. This award has been given in recognition of the ground-breaking work the company does in South Africa with its comprehensive HIV/AIDS response for both employees and their families.

All Anglo Coal employees are actively encouraged to test annually, with senior members of the management team taking HIV tests in public to lead by example. Employees who test positive can enrol in a free HIV management program offering care, support and treatment. As a result of this response, the company has seen mass employee engagement on this issue and 94% of permanent workers have been HIV tested since the programme began. Anglo Coal is now trending to have reduced the number of new infections to half what they were in 2005 by the end of 2009.

Anglo American was the first large company in South Africa to offer free anti-retroviral treatment to all employees back in 2002. There are currently 7,300 employees enrolled in the HIV disease management program across all Group companies in South Africa.

“These awards are given to an elite group of companies who set the standard for excellence in business action to defeat disease,” said GBC President and CEO John Tedstrom.

He continued, “They show what a business can do, and how to do it exceedingly effectively.  We need more businesses to take this kind of action. The fight against HIV/AIDS, tuberculosis, and malaria cannot be won without the corporate sector stepping up and playing an active role – and Anglo American and, specifically, its Anglo Coal division is doing exactly the kind of thing that all companies can and should do. Anglo American doesn’t just talk, they take action. And their action saves lives.”

Ben Magara, CEO of Anglo Coal South Africa, commented, “We have been dedicated to the issue of HIV and AIDS since the 1990’s and thanks to great leadership, a simple, clear system with world class medical support and a passion amongst all our employees to tackle HIV and AIDS, we are making headway against this disease.  We are incredibly proud of this recognition from the GBC and Anglo Coal continues to increase its efforts in this area, having recently extended our policy commitment to include the families of all our employees.”

To ensure broader community awareness of the issues around HIV and AIDS, Anglo Coal has recruited and trained over 250 ‘peer educators’. In addition, Anglo American will this year commit approximately R10 million ($1.2 million) to health and AIDS related services in disadvantaged areas of South Africa.

The GBC awards recognise companies which have demonstrated extraordinary commitment, action and results, and have achieved exceptional success in putting their assets to work in the fight against what it terms ‘three of the greatest threats of our time’.

Local market intelligence firm Frost & Sullivan does not believe that the merger between Anglo American PLC and Xstrata will go ahead.

“Without delving much into the synergies that are likely to be realised from the complimentary businesses, such as coal and iron ore, my feeling is that it looks very unlikely that this proposed merger between Xstrata and Anglo American Corporation will be consummated. Anglo American Corporation has divested from gold to principally focus on platinum, diamonds and industrial metals. The group would want to grow the company in these sectors and maintain its unique identity and world class assets.

“It appears to me that Xstrata has long desired exposure in certain mineral groups like platinum and diamonds, where Anglo American Corporation has a strong presence. Xstrata’s hostile takeover bid for Lonmin in 2008 which would have provided exposure to platinum, fell through due to volatility in the commodities market and funding uncertainties. Their proposed merger is partly motivated by Xstrata’s desire to gain exposure to mineral groups such as platinum and diamonds, where they have little or no exposure at all.

“There will also be problems regarding valuation of assets, given the current uncertainties in global capital and commodities markets. Frost & Sullivan is also of the opinion that competition authorities, especially in South Africa, are unlikely to approve of the deal.”

Resources group Xstrata PLC has responded to the offer made by Anglo American for a potential merger.

The company released the following announcement on Sunday:

Xstrata plc notes the announcement made by Anglo American plc (“Anglo American”) today.  Xstrata confirms that it recently sent a written proposal to the Board of Anglo American seeking their consideration of a merger of equals of the two companies.

Xstrata believes a merger of these two world-class companies with complementary assets is highly compelling.  The combination would create a premier portfolio of operations diversified across multiple commodities and geographies, with enhanced scale and financial flexibility to fund future growth.  Xstrata has already quantified substantial operational synergies from the combination that are not available to either company operating alone.  In addition, Xstrata believes the optimisation and reprioritisation of the combined company’s organic growth pipelines would significantly enhance shareholder returns.

Xstrata is seeking to engage with the Board of Anglo American regarding a merger of equals that would realise significant value for both companies’ shareholders.  There is, however, no assurance that any transaction will be forthcoming from Xstrata’s proposal. Any further announcement will be made if and when appropriate.

Earlier this week it was announced that the Zimbabwean Stock Exchange (ZSE) would be open for trade for the first time since November 2008. Does this provide a sign that this mineral and agriculture rich country may be reaching a point where firms should begin to give serious consideration to reinvesting in the troubled African country?

Information on the ZSE remains sketchy on the internet but according to media reports the only company that traded was Apex, an engineering and stationery firm. The company sold 3,026 shares, each for one US cent.

There are apparently 80 stocks listed on the ZSE at the moment and the stocks are trading in US dollars due to the hyperinflation that has destroyed the value of the Zimbabwe dollar. 

Capital markets remain an integral part of “wealth” for both consumers and the corporate sector and for this reason it is vital for an economy to retain a fully functional stock market.

Many consumers or retail investors retain a big portion of their wealth, insurance or pension funds in the equity markets despite the recent turmoil. If the Zimbabwean stock market can begin functioning properly and provide opportunities for retail investors to grow their wealth, this begins to provide an underlying springboard for the economy.

Similarly, the country has been ravaged by nearly two decades of civil war and dictatorial rule, setting the country back a long way in terms of infrastructure. Providing a market place where firms can begin to raise capital is also a starting point in the rebuilding process.

Many blue-chip resource companies including Impala Platinum, Aquarius, Anglo American and Anglo Platinum have retained both precious and ferrous metal operations in Zimbabwe despite the political turmoil. Perhaps their patience will be rewarded in the next decade if business begins to find its feet.

Many sectors in Zimbabwe including tourism, mining, manufacturing, tobacco, farming and telecomms were extremely healthy and profitable for investors before political interference took its toll. Currency problems – Rand, Zimbabwe Dollar, US Dollar – are likely to weigh on an investors decision to put money into the system. Investors are unlikely to want to invest in something were inflation is simply pushing their investments backward.

The Johannesburg Stock Exchange (JSE) has recently launched its own Africa Board as a way to encourage the primary or secondary listings of other African businesses in South Africa. This week, Namibian financial services firm TrustCo launched on the JSE and there are apparently plans for other resource firms to list locally.

A functioning Zimbabwean exchange would help the flow of capital and wealth into the country.

While it may not constitute sound financial advice: Investors are regularly told that it is impossible to identify the “bottom” of an investment market, perhaps Zimbabwe is as near its “bottom” as it is likely to go?

Do Ferronews.com readers have thoughts on the Zimbabwean situation and whether or not there would be opportunities to invest in the country?

Anglo American shocked the mining sector as it announced another 9000 jobs to be cut and declined to pay a dividend for the first time since the Second World War. Shares in the heavily debt-laden company fell by over 15% on the JSE on Friday after the company announced financial results for the year ended 31 December 2008. Ferronews.com sees what CEO Cynthia Carroll had to say and provides some commentary.

From a strategic perspective, the company said that the following divisions remained “core” to the group as the resource giant attempts to consolidate as the economic slowdown takes a grip: Base Metals, Platinum, Ferrous Metals` core businesses (Kumba Iron Ore, Scaw Metals, Samancor Manganese and Anglo Ferrous Brazil), Coal and Diamonds.

Cynthia Carroll, chief executive, said:                                      
“Overall, Anglo American delivered a solid performance in 2008 – a year that saw the end of a lengthy period of highly supportive commodity prices as the trajectory of the global economy turned sharply downwards during the second half. We achieved operating profit of $10.1 billion and underlying earnings of $5.2 billion, with strong performances from our coal, iron ore and manganese businesses.                                                        

The breadth and severity of the global economic downturn and its impact on growth rates in key sectors and economies are difficult to overstate. From global automotive production to construction activity in emerging markets, there was a marked contrast between the first and second halves of 2008, when
commodity prices fell sharply. As we begin 2009, the economic outlook remains weak, with limited visibility and we are continuing to experience volatility and downward pressure on commodity prices. Against this backdrop, we have acted decisively to position the Group through the downturn, including pulling back planned production growth, reducing the size of our workforce by 19,000 by the end of 2009 in line with our revised production and growth plans and further cost cutting throughout the Group. These actions are necessary to ensure that Anglo American is well positioned through the cycle, both operationally and financially, to continue to deliver long term value to our shareholders.
       
In December, we announced that capital expenditure plans for 2009 would be scaled back by some 50% in response to the changed economic outlook. We nevertheless remain committed to our long term strategy and will continue to allocate capital to our existing businesses and the advancement of our portfolio of high quality development projects. Despite the current economic environment, we have confidence in the fundamentals and long term outlook for our core commodities. We therefore believe that our projects remain a key driver of future value creation for shareholders, with several projects well timed to enter production from 2011 onwards. 

The three key cost-saving and efficiency initiatives that we have put in place over the last 18 months are well advanced and are already beginning to make an important contribution to our financial and operating performance.

Such disciplines are particularly valuable during these times. The asset optimisation programme has been rolled out across the Group and is expected to contribute a significant uplift to operating profit of some $1 billion over the next three years. This is in addition to the expected $1 billion in savings by 2011 we have announced from our procurement and shared services initiatives,which have already delivered value of over $200 million in savings in 2008.
    
While the global economy continues to face unprecedented challenges and, with severely constrained financing markets, it is critical for us to safeguard balance sheet flexibility as far as possible.

Notwithstanding the other measures we have taken, the Board has decided to suspend dividend payments in order to preserve the Group`s strategic growth options. 

We made further strategic progress during 2008, including the significant achievement of securing `new order` mineral rights across our mining businesses in South Africa. We made further disposals of non-core assets, including the sale of the Group`s investment in China Shenhua Energy for $704 million, the sale of Tarmac Iberia for $186 million and the sale of Namakwa Sands and 26% of both Black Mountain and Gamsberg to Exxaro Resources for a total of $353 million. During the year, we also advanced our long term iron ore growth strategy by securing control of the Minas-Rio project and the

Amapa iron ore  system in Brazil. Minas-Rio has multi-phase expansion potential, the first phase of which is due to begin production in 2012. In recent weeks, we have also reduced our shareholding in AngloGold Ashanti to 11.8%, realising total proceeds of $434 million. 

I am encouraged by the much improved safety record of the Group over the last year. Of particular note was the significant reduction in the number of fatal incidents, though there is much work still to do. The changes we have made across Anglo American and in collaboration with the South African government, unions and the mining industry, are saving lives and reducing injury rates and we must continue to do all we can to progress towards our ultimate goal of Zero Harm. 

Anglo American has a world class asset base with long life, low cost mines and a strong and geographically diverse project pipeline across the most attractive commodity segments. In light of the many challenges faced by the global economy and by the mining sector during the second half of 2008 and expected to continue during 2009, we have taken decisive action to position Anglo American through the downturn and to emerge in robust shape, ready to capitalise on the next phase of economic growth.”

Ferronews.com commentary:
These results will send a shudder through those businesses who supply into the mining sector. The consequences of the additional 9000 job cuts will of course be felt but scaling back on capex projects is going to bite. The reason being the long lead time it takes for these projects to be reinitiated. It is easier to go with the ebb and flow of job cuts and re-recruiting, but tendering out for projects and going through the whole project management process can easily take a year – especially if key people have been lost during the process.

The cutting of the dividend sends a clear message – the company isn’t expecting the economic climate to turnaround quickly in the next few months either. A big company like Anglo American takes a lot of time to turn around and reposition itself.

We also wouldn’t be surprised if the company announced further job cuts, mothballing of operations and even asset sales over the next six months as the slowdown bites deeper into their operations and they try to shuck some of the debt off their balance sheet.

Not a pretty picture, but there may be some positive spinoffs as a result of the recent surge in precious metals.

Ferronews.com will be writing a bit on the precious metals surge and some positive spinoffs around layoffs and gearing down shortly.