There was relief at Anglo American’s London headquarters on Thursday as Xstrata walked away from its nil-premium merger proposal.
By seeing off its younger rival, Anglo has given a boost to Cynthia Carroll, chief executive, and Sir John Parker, its newly appointed chairman.
Before the Xstrata approach Ms Carroll was facing shareholder unrest following a dividend cut, as well as internal dissent over her attempts to change the way the company works. She has emerged from the process in a stronger position.
However, significant challenges lie ahead for Anglo and its management team.
To justify the backing she has received from shareholders, Ms Carroll must push ahead with her efficiency drive.
The outline of this drive remains unchanged.
The company expects to save $2bn (£1.2bn) through better procurement and mine efficiency improvements by the end of 2011.
By about 2012 it expects a huge iron ore project in Brazil and an expanded copper mine in Chile to lift earnings substantially.
Shareholders expect spotless delivery.
After guiding the market to expect $1bn in savings by the end of the year – after $450m in the first half – Anglo could aim to overdeliver with a higher figure when it releases annual results on February 19.
Meanwhile Sir John, appointed in July, could attempt to sharpen Anglo’s focus by bringing new faces to the board.
There is speculation that Nicky Oppenheimer, descendant of Anglo’s founding family, may step down from the board after 10 years but remain chairman of De Beers, the affiliate diamond company.
Such a move, however routine, could be the clearest sign yet that Anglo is not the hidebound house of yesteryear caricatured by opponents.
However, while Sir John and Ms Carroll can impose their own stamps on Anglo by cutting costs and re-shaping the board, the company remains, like all miners, a hostage to changes in commodity prices.
Anglo Platinum, the world’s biggest producer of the precious metal, has been a dormant contributor to earnings and was a target of criticism from Mick Davis, chief executive of Xstrata.
A rising platinum price could reinvigorate Anglo’s earnings and allow its board to reinstate the dividend, which was thought of as sacrosanct in South Africa, home to its core operations and many of its investors. Its suspension did much to undermine Anglo’s management and prompt Xstrata’s approach.
Conversely, falling commodity prices could make it nearly impossible for Anglo to shine, however far Ms Carroll manages to cut costs. That would lend strength to Mr Davis’s arguments that “super-major” size creates both security and flexibility.
Anglo has seen no other company pounce on it in its moment of weakness, suggesting that it is not an open target but rather a special project for Mr Davis. But while the Xstrata threat has gone away from now, it is only six months until Mr Davis can return.
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