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Anglo American Hires Cutifani as CEO After Losing $14 Billion

Anglo American newly appointed CEO Mark Cutifani
Mark Cutifani became chief executive officer of AngloGold in 2007 and will replace Cynthia Carroll as CEO of Anglo American Plc from April 3. Photographer: Sergio Dionisio/Bloomberg

Anglo American Plc appointed Mark Cutifani as chief executive officer as the mining company seeks to reverse the $14 billion loss of market value it suffered in the five years his predecessor Cynthia Carroll was in charge.

The Australian Cutifani takes over from April 3, London-based Anglo said today in a statement. He resigned as CEO of Johannesburg-based AngloGold Ashanti Ltd., the third-largest bullion producer, AngloGold said in a separate statement.

“Mark was the unanimous choice of the board, having been interviewed by every single non-executive director,” Anglo American Chairman John Parker said. Cutifani will be paid a salary of 1.2 million pounds ($1.9 million), plus incentives.

Cutifani was the lead contender to replace Carroll, people familiar with the matter said this month, as the company battles cost overruns at projects including the Minas-Rio iron-ore mine in Brazil. Anglo American, the world’s largest platinum producer, has also faced labor disputes as South Africa’s mining industry last year struggled with escalating unrest after the deaths of 44 miners at Lonmin Plc’s Marikana operation.

“The appointment ticked one of the major boxes, which is getting experienced operational talent,” Paul Gait, a Sanford C. Bernstein & Co. analyst in London, said by phone. “His deep mining experience makes him a very different CEO from Cynthia but the strategic direction of the group is still uncertain. We don’t expect anything on that for about six months.”

Share Reaction

Anglo American advanced 1.4 percent to 2,028 pence by the close in London. That’s the highest closing price since Sept. 19. AngloGold declined 2.8 percent to 251 rand, the lowest level since Jan. 15, 2009, in Johannesburg trading.

Cutifani has about 15 years “association” with Brazil, he said today on a call with Parker. “I was heavily involved in copper, nickel, precious metals, including platinum, and pretty experienced to understand South America,” Cutifani said.

He replaced Bobby Godsell as CEO of AngloGold in 2007, and was chief operating officer of Vale SA’s nickel operations and managing director of Australian gold and tantalum miner Sons of Gwalia Ltd. until 2003. A mining engineer by training, Cutifani is also president of South Africa’s Chamber of Mines group.

“He knows the environment, the country, the politics, the business,” Albert Minassian, an analyst at Investec Ltd., said by phone. “He’s absolutely the right person here. The biggest task of Anglo American is to sort out the South African mining in general and the platinum business specifically.”

Government Response

South Africa has reacted well to Cutifani’s appointment, Parker said. “We have been in touch with the minister’s office overnight and she has had a positive reaction,” he said.

Anglo’s platinum, iron ore, and diamond mines in South Africa were among those idled last year by a wave of sometimes violent strikes. Workers demanded higher wages and complained of poor living conditions and bad labor union representation. The company is currently reviewing its platinum business and may announce the details within “a few weeks,” Parker said.

“Mark Cutifani has had exposure and experience with the South African trade unions,” Clinton Duncan, an analyst at Avior Research (Pty) Ltd., said by phone from Johannesburg. “Hopefully he brings more understanding with the unions and what’s facing the South African mining companies.”

At AngloGold, Cutifani led efforts to increase capacity to benefit from record prices. He has also been an advocate for economic changes in South Africa, where AngloGold is based and Anglo American has its roots and many of its operations.

Margin Growth

“Mark did a great job putting AngloGold back on the right track,” Paulson & Co., a New York-based fund run by billionaire John Paulson that manages about $19 billion, said by e-mail. “AngloGold is positioned for strong growth and is ready for a change in leadership.” Paulson & Co. is the gold company’s largest shareholder, according to data compiled by Bloomberg.

During Cutifani’s tenure, AngloGold’s operating margins went from minus 16 percent in fiscal 2007 to an estimated 30 percent for fiscal 2012, data compiled by Bloomberg show. Margins at Barrick Gold Corp., the largest gold producer, rose from 22 percent in 2007 to an estimated 41 percent last year.

AngloGold has begun a CEO search and will consider internal and external candidates. Chief Financial Officer Srinivasan Venkatakrishnan and Tony O’Neill, vice president of business and technical development, will act as joint interim CEOs.

Anglo, set up in 1917 to mine gold in the East Rand region, got more than half its 2011 operating profit in South Africa. Carroll said in December it’s committed to the country.

In contrast, Johannesburg-based Gold Fields Ltd. plans to split its international operations from most of its mines in South Africa, where the National Treasury estimates the strikes would cut 2012 economic growth by about 0.5 percent.

AngloGold was spun off from Anglo American after the latter said in 2005 it would give up control of the gold business that helped build up the fortune of South Africa’s Oppenheimer family. Anglo American sold its final 11 percent stake in 2009 for $1.28 billion to John Paulson’s investment firm.

Carroll, 56, was the first woman, external hire and non-South African to lead Anglo. She held the job for about five years before the search for a replacement, led by Parker.

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