Pirates to starboard, politicians to port
28 September 2009
Sean Russo
I LUNCHED this week with 700 other people at the Brisbane Mining Club. Such was the interest in the speaker Cynthia Carroll CEO of Anglo American that the venue kept being changed as the numbers swelled.
It’s tough in this day and age for a CEO to say anything at all that’s interesting because of disclosure laws. I mean, she was hardly going to share her views on Xstrata in the intimate surroundings of the Brisbane Convention Centre.
Carroll is clearly very smart and I know not everyone enjoys speaking publicly, but isn’t it reasonable to expect passion, enthusiasm and vision from a leader, particularly the leader of an industry leader. I saw none of these things. I certainly wasn’t inspired to run out and buy Anglo stock.
While spruiking the stock was not the purpose of her talk, for me one of the best supportive reasons to buy a stock is when the passion and determination of the CEO is palpable. There was no rallying cry, just the sense of lots of hard slog and uncertain reward. That’s not a problem of Carroll’s own making necessarily; governments seem hell bent on making life difficult for coal miners and one can only imagine the challenges in trying to change the culture in a company like Anglo American, which is what I assume she was chosen to do.
Carroll’s drive to cut fatalities at the company’s mines is commendable. One human life is not an acceptable or unavoidable operating cost, let alone the numbers Carroll was confronted with on arrival at the top job. One can only wonder about the attitudes and entrenched practices she has had to overcome with regard to costs and investments if the company was previously that accepting of the loss of life experienced.
It appeared to me most of the people in the room were service providers of some kind, lawyers, accountants, contractors (which should be a reminder to government that job losses at mines in the middle of nowhere have impacts closer to home). Some of them would have been flinching about her comments on reduction of operating costs, rationalisation of suppliers and centralisation of purchasing. It was interesting but hardly inspiring and nothing more than we should expect of a reasonably committed COO and CFO.
That said, the numbers were quite staggering. In Australia alone they had reduced approved suppliers from 14,000 to 3700. It seems to me that must presage a significant further consolidation of the mining services industry in Australia and elsewhere. I assume that kind of rationalisation generally squeezes out the smaller players and I wonder what impact that has on the communities around their mines. But again it was talk about what they had done, not what they were going to do.
With the size of Anglo’s coal business in Australia there was no avoiding climate change and the message to the government was modify your current stance or expect significant losses in jobs and royalties. Of course Anglo is doing all those things you would expect of a big company to be a better corporate citizen and reduce their footprint. I couldn’t help but think these initiatives may well chew up many of the savings that had recently been made. Oh, and of course some of the things that would drive required change would rely on new technologies not yet developed. We can assume they won’t be cheap, simple wins.
The most amusing part of the lunch was the second, and as it turned out, last question where someone from the stalls asked Carroll if she was willing to share with the audience the due diligence she was relying on to confirm her belief that humans are responsible for climate change. He then lost his early audience support when he went in to a three-minute ramble about the geological record being against her and she as a geologist should be aware of that. Sadly that line of questioning seemed to lead to an abrupt end of question time. Seven hundred punters, two questions!
My association with the mining industry has always been at the junior end where I have been fortunate to be involved with many enthusiastic entrepreneurs who don’t know the meaning of no and see a failure as the end of a chapter not the end of a book.
I have never really paid much attention to the majors or invested in their shares. This lunch reminded me why.
Carroll is clearly talented, experienced and motivated but she is on the bridge of the proverbial supertanker that has a 20-mile turning circle, and is tasked with trying to outmaneuver much more nimble competitors, some of whom share a flexibility and tactics more akin to Somali pirates.
I’m just a mug punter without an MBA but it seems to me to deliver real value to shareholders Anglo should beat the pirates and the politicians at their own game and break itself up into a number of more nimble companies rather then trying to drive such disparate businesses (metals and geography) from Global HQ.