In 1917, Ernest Oppenheimer met with South African general and soon-to-be prime minister Jan Smuts to seek his blessing for a new mining company called Anglo American. Smuts wanted one assurance — the company was there for the long haul.
Anglo, along with its sister company De Beers, made Oppenheimer a billionaire and his descendants one of Africa’s richest families. The company became South Africa’s biggest, a conglomerate once spanning brewing, publishing and gold mining. Now a century later, Anglo is trying to cut many of the ties with the country where it all began.
While South African mines were cash cows for decades, Anglo now wants to sell them next year to cut debt accumulated during the commodity boom, when it spent $14 billion on Brazil’s Minas-Rio. How to package the assets and which to include will be major choices for Anglo, and it faces opposition from a government pension fund that is also the biggest investor. With so much history and national identity wrapped up in the company, it will be a complicated divorce.
“South Africa’s economic development basically began with gold and diamonds, and Anglo was a major part of that,” said Dave Mohr, who helps oversee 110 billion rand ($8 billion) as chief strategist at Cape Town-based Old Mutual Multi-Managers. “Decisions were made to buy very expensive assets at the top of the commodities cycle. That’s their biggest problem and the main reason they’re now having to sell.”
Many of the South African operations weren’t profitable when metal prices were depressed, and allegations of widespread government corruption and uncertainty over mine regulation have long been a concern for investors.
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