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Anglo Seen by Bernstein as Ending Years of ‘Self-Harm’

Anglo American Plc (AAL), the metals producer reviewing global assets to boost profit after replacing its chief executive officer, has started correcting years of “self-harm,” Sanford C. Bernstein Ltd. said.

“Anglo American has potential to unlock significant value from longer-term key assets,” Paul Gait, a London-based Bernstein analyst, said in a note today. The company is “presenting the most-compelling restructuring story in the mining space for a long-term value investor,” he said.

Mark Cutifani, who in April replaced Cynthia Carroll, set a goal of improving Anglo’s return on capital employed to at least 15 percent by 2016 from 11 percent last year. Carroll quit amid cost overruns and delays at Anglo’s Minas-Rio iron-ore project in Brazil.

“Anglo is in the process of ‘self help,’ correcting five years of ’self harm’ of over-promising and under-delivering when it was led by the previous management,” Gait, who rates Anglo as outperform, said in the note.

Anglo has dropped 11 percent in London trading since Cutifani took office. BHP Billiton Ltd., the world’s largest mining company, is down 4.4 percent. Rio Tinto Group has advanced 7.2 percent, while Glencore Xstrata Plc has retreated 12 percent.

Anglo has three main targets, Gait said. The company seeks to deliver the first ore from Minas-Rio; to “reconfigure” the Sishen iron-ore mine in South Africa and increase output to 35 million metric tons from 31 million tons last year; and to restructure its strike-afflicted platinum business.

Platinum Margins

Production at its Anglo American Platinum Ltd. unit in South Africa, the world’s biggest producer of the metal, has been disrupted by a walkout over pay that started Jan. 23.

Operating margins at the platinum business declined 85 percent between 2000 and 2012, even as the price of the metal increased almost three-fold to $1,532 an ounce, Gait said.

“We believe that there is value in both the Minas-Rio project and Anglo Platinum,” Gait said. “But it will take time and a determined and bold strategy from new CEO Mark Cutifani to unlock this value.”

To contact the reporter on this story: Firat Kayakiran in London at fkayakiran@bloomberg.net

To contact the editors responsible for this story: John Viljoen at jviljoen@bloomberg.net Alex Devine

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