After two near-death experiences in the past decade, Anglo American’s decision to enter into a $60bn “merger” with Canadian copper and zinc producer Teck Resources to create Anglo-Teck will be the final death knell to the company, which exited its investment in Valterra Platinum in April.
After the so-called merger, Anglo-Teck will be left with just one asset in South Africa, Kumba Iron Ore, which had 14,766 employees at end-2024. According to some analysts, Kumba will also eventually be sold. In a research note, JP Morgan Cazenove wrote: “We expect that if this merger is completed, iron ore could eventually be divested or demerged to create a copper pure play.”
Under this scenario Anglo could end up with no employees in South Africa. A decade ago it employed 88,661 people in the country. A complete exit would be a sad ending for Anglo, which Ernest Oppenheimer established in 1917 and grew into the country’s largest company. Over the next 77 years Anglo expanded into mining, industry and finance in South Africa and acquired international assets.
By 1994 it controlled companies that accounted for 43% of the JSE’s market capitalisation. After 1994 there was a huge restructuring of South African mining houses, including Anglo, in response to investor demands for sector focus and the simplification of complex ownership structures.
In 1999 Anglo listed on the London Stock Exchange while retaining a secondary listing on the JSE. It took more than a decade to dispose of its non-mining interests but Anglo did become a focused mining company. Yet its track record in mergers & acquisitions has been dismal.
A “merger” between Anglo and Teck will merely illustrate the folly of allowing mining companies to play Monopoly with a country’s natural resources. SA’s natural resources belong to its people, not the companies that mine them. It was a mistake to allow companies such as Anglo to exit South Africa and have primary listings in London in the first place.
BHP offer
Anglo had its first near-death experience on January 18 2016, when its shares plunged to a low of R55, valuing the company at $4.7bn (R79bn) — less than half of its net debt, which had soared to $13bn at end-December 2015 from $1.4bn in 2011. The company had made some costly mistakes, such as investing $14bn in the Minas Rio iron ore project in Brazil at the top of the commodity cycle, and paying shareholders special dividends totalling $5bn during the good times.
Anglo announced a restructuring plan that involved shedding numerous assets. But after a spectacular rerating of its shares in 2016 on the back of firmer iron ore prices and progress in asset sales, it tempered its plans. In April 2024 Anglo said it had received a $39bn offer from BHP, which was conditional on demerging its stakes in Valterra and Kumba. BHP’s target was Anglo’s copper mines in Chile and Peru. The offer would have resulted in the end of Anglo and its listing on the JSE.
During both episodes — in 2016 and 2024 — the best option for SA Inc would have been a demerger of Anglo’s South African assets into a new national mining champion with state (Public Investment Corporation and Industrial Development Corporation), community, worker and empowerment shareholders having a majority stake in the company. South Africa should have supported the BHP offer, which offered a perfect opportunity to create a national mining champion.
Anglo management fought the BHP offer and announced a plan to focus on copper and iron ore and shed non-core assets. Since then Anglo has implemented a demerger of Valterra and announced plans to sell its steelmaking coal, nickel and diamond businesses. But it encountered problems with all these asset sales.
On September 9 this year Anglo announced “a merger of equals” with Teck Resources to create a company that will focus on copper, iron ore and zinc. But the proposed transaction that was disclosed was more like a takeover, to the benefit of Anglo executives, Teck and the Canadian economy.
No merger of equals
On every metric, this is not “a merger of equals”. Anglo is far larger than Teck, even after the new company has sold assets from the Anglo side of the business. Anglo has a market capitalisation of $42bn, double Teck’s $20bn. Talk of “a merger of equals” is political — to justify giving most of the benefits to Canada after intense pressure from its government, including Prime Minister Mark Carney.
Anglo-Teck will invest C$4.5bn (R55bn) over five years in Canada. But Teck’s Canadian interests accounted for only 3.4% of Anglo-Teck’s revenues during 2024. Why does Canada, a country that is not even a shareholder in Anglo-Tech and contributes so little to its revenues, have such a large say over the fortunes of a company that will derive more than 90% of its revenues from four countries that are in the Global South?
What right does Anglo-Tech have to play monopoly with the natural resources of South Africa, Chile, Peru and Brazil? Botswana and Namibia are also affected because Anglo is in talks to sell De Beers.
After providing no financial details about commitments to South Africa in its recent circular, Anglo now highlights Kumba’s plans to contribute R600m to a junior mining exploration fund in partnership with the Industrial Development Corporation (IDC) and invest R11.2bn in a new processing technology at the Sishen mine. But R3.6bn has already been spent on the project; only R7.6bn will be invested over the next four years.
Canadian economy to benefit most
The investment in Canada is seven times larger. Anglo’s takeover of Teck will mostly benefit the Canadian economy and Anglo’s executives, who will move to Vancouver and get large bonuses if shareholders accept an incentive plan that also rewards them for concluding the transaction.
Before Anglo discards Kumba, South Africa must stop its takeover of Teck. Anglo’s South African assets now comprise 69.7% of Kumba, 40% of Samancor and 62.9% of De Beers Consolidated Mines. During 2024 these operations reported earnings before interest, taxation, depreciation and amortisation (ebitda) of $1.6bn — that is 22.3% of the group total excluding Valterra. There should be a demerger of Anglo’s South African assets into a new listed state-led mining holding company.
Anglo shareholders would get shares in this company. With a new company, Kumba would delist. Alternatively, Kumba could be the state mining holding company, acquire Anglo’s manganese and diamond investments and change its name. The Public Investment Corporation (PIC) owns 6.9% of Anglo’s shares worth R52bn and 2.7% of Kumba worth R2.9bn. The IDC owns 12.9% of Kumba shares worth R13.9bn. The state shareholding in Anglo and Kumba therefore amounts to R68.8bn.
Community and employee trusts own 4.2% of the Sishen Iron Ore Company (SIOC), which is worth R6bn. If Anglo’s local assets are worth R150bn — a fifth of its market capitalisation — the PIC’s 6.9% stake would become a 34.5% share of the new business. After adding their interests in Kumba and the SIOC there could be state, community and worker ownership of 50% in the new company.
• Gqubule is an adviser on economic development and transformation.
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