THE excitement that followed Gold Fields’ decision to reduce its exposure to South Africa’s mining jurisdiction, has got people talking over how Anglo American will go about its restructuring.

Some, like Barry Fitzgerald, a columnist in The Australian, point to chatter in the industry about the 95-year-old Anglo being split along geographic lines into three new listed companies.

There definitely is some talk going on. Since Gold Fields’ Nick Holland made the announcement last week, Anglo’s shares have gained for three consecutive days.

Any possible breakup would see rivals such as Rio and BHP Billiton swirling around for any vulnerable pieces of the diversified miner. The soon to be merged Glencore-Xstrata will be interested.

According to Bloomberg data, Anglo’s South African businesses, which include platinum, iron ore, coal and diamonds, make up 49% of the company’s revenue. South American operations contribute 22%, Australia and Asia 14% and the rest of Africa 7.6%.

While platinum hasn’t been a star performer of late and has weighed on the miner’s prospects since the 2009 recession, it’s been an excellent source of funds in better cycles. A senior mining executive told me recently that those involved with platinum understand that the mineral moves in six-year cycles, but investors just don’t seem to be getting it.

It could be argued that if Anglo hadn’t used proceeds from its platinum unit to expand vigorously anywhere but in South Africa, and had instead reinvested in the unit, the platinum unit would be in a much better position than it is now.

In Anglo’s 2008 annual results, its platinum unit recorded operating profit of $2,697bn, which was 30% of the company’s total operating profit. It was a darling of the group and the main drivers of what’s been a troubling South American expansion.

Should they decide to unbundle the operation into a separate vehicle next year under another CEO, they may come to regret that decision, no matter the problems in South Africa’s platinum sector.

The noise about platinum in recent months may have startled investors both in South Africa and abroad, but the proof of its value is Xstrata’s attempts to get full control over Lonmin, probably the most troubled of a troubled bunch.

While Anglo’s Kumba Iron Ore unit may be in for a couple of turbulent reporting periods because of low commodity prices, it too has proved one of its more successful units in times past.

Prospects for coal in South Africa, where there remains more than 400 years worth of reserves, has Glencore’s Ivan Glasenberg all excited. I’d be surprised if Anglo would divest.

If these talks of an imminent Anglo split are proved true, it will be really interesting to see where its South African assets are going to end up. Will they be unbundled unceremoniously into a JSE-listed vehicle and be considered noncore to its future?

I doubt it very much, but only time will tell.


SIGNS of an improving Chinese economy couldn’t have come at a more opportune time for South Africa, given the worrying slowdown in the country’s exports that have widened the current account deficit.

Data on Monday showed that China’s purchasing managers’ index, a measure of the manufacturing industry, rose to 50.6 last month. A reading above 50 indicates expansion. It was the strongest reading in seven months, which may be a signal of recovery in the world’s second-biggest economy.

The rand strengthened on the data, along with commodity prices. China buys more than 10% of South Africa’s exports, mainly commodities.

Domestic worries aside, commodity-based currencies such as the rand, have come under pressure this year, as investors feared that the Chinese economy was heading towards a rapid decline.

It’s not all good on the export front, however, as Europe and the eurozone in particular, remain in a recessionary condition.

While manufacturing sentiment improved last month, the upturn in the common monetary area remains slow. The purchasing manager’s index rose 0.8 points to 46.2, still indicating contraction.

Europe remains the key ingredient in getting the South African and global economic recovery back on track. Without any confidence, even the Chinese signs of recovery will start to lose a bit of steam.

With analysts expecting an end to the age of austerity next year, commodity prices and currencies linked to them, such as ours, may stage a recovery.

The rand has weakened more than 10% over the past 12 months.