You can’t blame Anglo American CEO Duncan Wanblad for sounding a shade weary when asked if there’s the pressure of expectation in the wake of the retirement, in April, of Mark Cutifani — his predecessor of nine years. It’s what everyone connected with Anglo has been talking about.
“It doesn’t worry me,” says Wanblad. “It’s not something I have to do anything about.”
No doubt about it, Cutifani is a tough act to follow. The group helped burnish this perception in May with a sumptuous feast in his honour at its Vergelegen wine estate. Once the valedictories were over, however, there was still a company to run — a company, lest anyone needs reminding, that Cutifani transformed from tractor to race car.
Strapped into the driver’s seat is Wanblad, a 55-year-old mining engineer who, despite waging an upwardly mobile career exclusively at Anglo since 1994, still conveys the bloom of youth. “I don’t feel it,” he says when asked about this. But travel fatigue has got to him lately, he adds.
Wanblad has been criss-crossing Anglo’s operations in South America, Africa, Australia and Europe in an effort to “set up my own relationships”. It might be more time in the air than he’d prefer, but Wanblad has to establish “his own CEO stamp in the glare of some pretty extreme hype around his predecessor”, as one UK analyst describes it.
So far, the feedback from the investment community is encouraging. “He’s definitely the right man for the job,” says Tim Clark, an analyst at Standard Bank Group Equities in Joburg. “He knows platinum group metals [PGMs], he ran Anglo’s base metals division, and for the past five years, Duncan’s been head of business development, sitting in an office right next door to the CEO.”
The way Wanblad sees it — the name is pronounced with a “W” and a “D” at the end — there is a logic that makes his transition from team man to company leader relatively smooth. While being “delighted” that the board chose him as CEO over a shortlist of internal candidates, it makes sense that as head of strategy he’s inheriting some of the decisions he helped make.
“Mark was sort of repositioning and I’m an executioner of that repositioning,” says Wanblad.
When Cutifani took over Anglo in 2013, the company was in big trouble. It had lost a lot of its technical expertise and had overcommitted its balance sheet, largely on an iron ore mine in Brazil that led to Anglo passing the dividend. Meanwhile, the market for commodities was beginning to cool. The previous CEO, Cynthia Carroll, quit in 2012.
It took about five years for Cutifani to fix the problems and take Anglo on a new trajectory. He fixed the balance sheet, rolled out a streamlined project pipeline and drove a new operational model, innovating on skills, resources and technical deployment.
“I was part of Mark’s team from day one, really,” says Wanblad of the years from 2013 to 2022. “I feel like we built this business together with the rest of the GMC [group management committee], so it’s not like there is anything I want to change significantly from a strategy point of view. I’m really very much part of what we created under Mark and this is what I’d like to build and take forward.”
In practical terms, this means building out the projects already under the hood: Mogalakwena, a PGM mine held in Anglo’s 80%-owned Anglo American Platinum (Amplats); the expansion of Collahuasi, an operating copper mine in Chile; a greenfields polymetallic project in Finland called Sakatti; and Quellaveco, the $6bn, 300,000t-a-year Peruvian copper mine that is presently ramping up.
Quellaveco has analysts purring. “We think continuing execution on the company’s key growth driver, the Quellaveco copper project, will be the main driver for a rerating,” Goldman Sachs analyst Geydar Mamedov and colleagues write in a recent note on Anglo, which they rate a buy. Quellaveco represents a 40% year-on-year increase in Anglo’s copper production, which rivals such as Glencore and BHP can’t match. The metal will make up 33% of Anglo’s earnings before interest, tax, depreciation and amortisation in the 2023 financial year — the largest contributor by commodity — compared with 2022.
But if any single asset or project is going to benchmark Wanblad, it’s got to be Woodsmith, an enormous deposit a kilometre beneath the UK’s North York Moors containing the soil nutrient mineral polyhalite — a type of potash that improves crop yield.
The project was controversial for Anglo because its £405m acquisition in 2019 was considered pricey, given that its owner, Sirius Metals, was in funding difficulties. Then Anglo extended the project’s approval by a year, raising concerns about its technical aspects.
Woodsmith is particularly relevant for Wanblad because he’s the guy who put it at the sharp end of Anglo’s business strategy. In his view, it’s the cat’s pyjamas: “It’s a minimum of a 50-year-life orebody, possibly longer. If we get this right, it’s going to supply high-quality, low-carbon fertiliser products for decades, absolutely decades.”
A large portion of Anglo’s production is geared towards battery metals such as copper and nickel. The market for soil nutrients, however, is a new departure for Anglo and could become a differentiator in a similar fashion to its 85% stake in diamond company De Beers. Diamonds, the ultimate nonfungible, require the sort of market intelligence and strong bonds with customers that De Beers is skilled at managing. Anglo thinks marketing its polyhalite will require similar expertise.
Demand for soil nutrients and fertiliser products is on the rise. Absolute levels of global hunger are set to be the highest yet this year, agreements to liberate Ukraine’s trapped wheat exports notwithstanding. According to the World Food Programme, there’s been a more than doubling in the number of people without regular access to food. It estimates 800-million people go to bed hungry every night.
Clark says while Anglo won’t admit it, Woodsmith is to Wanblad what Quellaveco was to Cutifani — a legacy project that will help sustain Anglo’s growth narrative. Until details of Woodsmith’s feasibility study are published, however, its relevance will remain underexposed. But it’s a potentially enormous project for Anglo, says Clark.
Assuming the project’s first phase requires $5bn in capital expenditure, that’s about 10% of Anglo’s current market cap. On an equivalent project to market-cap basis, BHP would have to spend about $15bn. That, in absolute terms, dwarfs the $5.6bn it is spending on its fertiliser project, the Jansen potash project in Saskatchewan.
“It would raise a lot of eyebrows if BHP were to spend so much on one thing,” says Clark. The implication for Anglo is that, as far as projects go, Woodsmith is a major step out.
Woodsmith also keeps Anglo true to its diversified mining company roots. To an extent, this has been lost in the big-cap mining sector amid the industrywide shareholder rebellion in 2015, following the metals price correction. Investors sought focus and capital discipline from diversified mining firms, resulting in greater specialisation. For Rio Tinto, it is iron ore; for BHP it is copper. Anglo has these minerals, but it also has PGMs and diamonds and, potentially, polyhalite.
Risks abound
Wanblad has had an easier ride in Anglo than his counterparts at either Glencore or Anglo-Australian company Rio Tinto. The latter’s CEO, Jakob Stausholm, rode into Melbourne on a ticket to transform Rio’s workplace culture, given the swathe of bad press the firm has received. It blew up caves regarded as sacred by Aboriginal Australians, and a report found roughly half of the company’s employees had encountered bullying in the past five years, much of it gender-based.
At Glencore, newly appointed CEO Gary Nagle has been tackling the fallout from an investigation into corruption that has cost shareholders more than $1bn in penalties.
Wanblad’s first year at Anglo has been noiseless, though pressures do exist. The outcome of new diamond contract negotiations with Botswana are unresolved. In Zambia, the company faces class-action litigation on behalf of hundreds of Zambians allegedly poisoned by Kabwe, a lead mine in which Anglo was long invested. In Zimbabwe, the revenue authority has sought to garnish funds allegedly due to it that, if payable, will damage the viability of Unki, the group’s PGM mine in the country.
But these are skirmishes compared with the hairier industrywide concerns that raise questions over the sustainability of Anglo’s share price performance, which has outstripped all before it. The formal rejection of an environmental permit enabling the extension of Anglo’s Los Bronces copper mine in Chile is a demonstration of how political change to the right of centre or — in the case of Chile — to the left quickly changes the ground under the feet of miners.
“Permitting delays and preventative decisions across the global mining industry are highly relevant for the long-term outlook of new metals supply,” Dominic O’Kane, an analyst for JPMorgan Cazenove, said in a report earlier this year. Wanblad worries how mining firms such as Anglo can “close the loop” in terms of supplying the minerals the world requires for renewable power and electric mobility.
Beyond jurisdictional risk, there is uncertainty about the direction of economic growth, especially as China emerges from its hardline Covid lockdowns, assuming that it’s doing so. Analysts are unsure of the extent to which China’s return to full economic activity is priced into mining shares, and who wins when the country’s “bumpy” return commences, as Goldman Sachs terms it.
According to analysts at Morgan Stanley, PGM demand into China will recover — “but not as much as would otherwise be expected”, as vehicle sales and imports are already elevated.
Inflation, meanwhile, is resulting in margin pressure — though Anglo’s South African weighting is in this regard a blessing, given the producer currency advantages.
Inflation is also weighing on diamond sales. De Beers recently doubled the size of its rough diamond buyback programme, which enables it to limit supply without having to cut prices.
Google Trends said recently that searches for “diamond jewellery” and “diamonds” were at a five-year low, potentially pointing to softening buying intentions amid high inflation and economic uncertainty. Data from Mastercard showed that spending on jewellery in October turned negative for the first time since December 2020 and came in at -3.8%, against 7% growth in September.
At his inaugural results presentation in August, Wanblad described the market as “choppy”. Some analysts have used stronger terms. In a report this year McKinsey & Co said the globe was on the cusp of a new economic era typified by political polarisation, energy crises and market fragmentation.
In the shorter term, analysts expect a modest performance for Anglo in 2023.
“We continue to like the medium-term outlook for Anglo given the group’s leading project pipeline and well-diversified portfolio, but operational performance has been relatively weak, macro uncertainty is elevated and we anticipate only modest cash flows and shareholder returns in 2023,” says Deutsche Bank analyst Liam Fitzpatrick.
Born to mine
The Wanblads are a mining family. Wanblad’s father, Graham, was a director of JCI, his uncle was a miner, and his grandparents had an affiliation to the industry. And yet mining wasn’t “a burning ambition” for Wanblad junior — at least not as a school pupil.
“I was originally going to be a doctor, and that’s where I had my heart set,” he says. “But as we got into university applications I quite liked what I’d seen about mining.” After being awarded a bursary from JCI, he worked on the mines during holidays. “I absolutely loved the people. It became a natural segue.”
With many mining families, childhoods are spent growing up within the mine vicinity, often in rural locations. For Wanblad, some of his childhood was spent near Consolidated Murchison, an antimony mine east of Tzaneen in the pristine lowveld of what is now Limpopo.
“I loved Cons Murch. Mom never wanted me to go to boarding school so I went to the local school which was supposed to be dual medium, but actually was Afrikaans. And so the doctor’s son and I were the only two English-speaking kids at that school. We also happened to be the only two kids who went to school in socks and shoes. I kept taking my socks and shoes off and hiding them behind the fence. Then they just disappeared and I’d go home every day without socks or shoes. That created great consternation at home, but I loved it. It was one of the most delightful periods of my life.”
After starting at JCI in 1990, Wanblad moved swiftly through the ranks. He was joint CEO of Amplats and then Carroll posted him to Santiago, where he headed the base metals division. In those days Quellaveco was just another ore body. As Wanblad describes it, “all we had in Lima at the time was a geologist, a house in the city and a back garden full of drill string core [geological samples of the Quellaveco ore body].
“However, every ore body has its day,” he adds.
For Quellaveco, that wasn’t until about 2008, when Anglo dusted off projects it had held for years. Quellaveco had been on its books for about 30 years, but it wasn’t competitive earlier, as Anglo had been mining 1.5%-grade copper mines vs Quellaveco’s 0.5%-0.6% grade.
Over time, however, as average industry grades decline, mining inflation kicks in. New ore bodies are more remote and require new infrastructure build. By 2014 early development work on Quellaveco had begun in earnest, and by 2018 — with about 50% of the detailed engineering work complete — it was approved.
That gestation period accounts for the success of Quellaveco’s technical and budgetary execution, says Wanblad. It also proves the benefits of organic growth over more aggressive styles of expansion, such as M&A transactions.
That’s not to say M&A doesn’t have a future role in Anglo, as demonstrated with the takeover of Woodsmith. Wanblad was also quoted this year as saying that central Africa has “some very interesting rocks”. Asked about this, he acknowledges with a grin: “Very good rocks in Africa, and I’d like to think we would be a company that would be able to do that [conduct African M&A].”
But M&A is the less preferred route to growth, partly because there’s always a risk of overpaying. Additionally, if M&A is the only growth plan, strategy becomes a servant to government mineral prospect timelines. “Then things go wrong,” says Wanblad. “You have to be opportunistic.”
The search for new business has seen Anglo return to long-abandoned former stamping grounds: in May, it bought control of junior miner Arc Minerals, returning Anglo to Zambia 50 years after the government nationalised the copperbelt. Anglo is also setting foot in Angola again following an announcement by De Beers in 2021 of plans to open up exploration there.
These undertakings suggest jurisdictional risk is falling in Africa, though Wanblad urges caution. “I don’t necessarily think they [authorities] have moved completely into a space of stability yet, but they are starting to think slightly differently and so I think there is potentially an opportunity.”
The state of South Africa
Asked if Anglo would build a new mine in South Africa, Wanblad is evasive. “As I said, like in all jurisdictions we would want to be pretty sure there was a fiscal environment that was conducive to spending multiple billions before we were able to let loose.”
If that sounds suspiciously like a no, it’s worth remarking that Wanblad hasn’t held back on criticism of South Africa in the past. He told Miningmx in August that the problems at Transnet Freight Rail (TFR) would rival those of Eskom if not addressed speedily.
Two months later he was back in the country amid a two-week strike at Transnet, TFR’s parent company, that threatened to disrupt mineral exports. It was during this visit that the lights memorably went out on him as he was delivering a virtual address to the FT Mining Summit in London, on South Africa’s prospects.
Since then, the derailment of a coal truck stopped mineral deliveries on Transnet’s important North Corridor rail route, linking Mpumalanga and Limpopo to Richards Bay. Anglo hasn’t owned coal since demerging its coal division into Thungela Resources, but Wanblad is alarmed at the rate of infrastructure deterioration in South Africa.
“When your infrastructure starts crumbling and you have no way out of that, it’s really difficult to think about how you’re going to grow and how you’re going to create an environment for the business to flourish,” he says.
Anglo has been meeting with state-owned companies such as Transnet and the public enterprises department to discuss ways of fixing the rot. He’s optimistic, as the country’s CEOs mandatorily appear to be, evidence of the government’s cloth-eared response notwithstanding. He, like the minerals business in general, wants to establish joint ventures with the government on freight and energy, but until there’s a signed contract it looks like a pipe dream.
While not everyone will agree with Wanblad that the government cares and wants to solve the problems, there’s no doubting his assessment when he says: “Crime and corruption are the biggest things that we really need to get very serious about eradicating, especially here. There is so much potential that we’re not getting on top of because of endemic crime and corruption.”
From one of the roads that wind through the North York Moors, Anglo American’s Woodsmith project in the UK is barely identifiable.
An Anglo project mine manager describes the surface infrastructure as looking “like barns”. That’s because the headgear that is normally associated with underground mining has been sunk into 60m chambers beneath the earth.
A tunnel borer that, represented diagrammatically, looks like a hungry caterpillar munching through substrata, is sinking shafts as deep as 1.6km from the surface in a highly mechanised process. Robotics will help assemble the shaft, and mineral extraction will be through underground tunnels that extend 37km under the North Sea from Whitby to Teesside.
“Now what we have to do is configure it right — get it delivered right,” says Anglo CEO Duncan Wanblad.
Analysts don’t model the project as yet, as its final economics aren’t due for publication until early next year, with an optimised feasibility study. According to Goldman Sachs, however, Woodsmith will “fill a significant gap in the market for the sustainable resources of soil nutrients”.
Thanks to the Quellaveco project in Peru, Anglo’s technical reputation is high, and is “a strong indicator” of potential success.
So far, so good for Wanblad, who thinks, though, that there’s a risk of demand destruction if the world’s mining sector continues to underdeliver on projects. “I can’t close the loops in terms of where this material is going to come from — how long it’s going to be supplied to service the needs of this demand,” he says.
Wanblad has already been widely quoted as saying the world requires 60 new Quellaveco projects to supply the copper that would contain global warming to 1.5°C by 2050, as set down in the Paris Agreement.
That’s equal to $330bn in new investment for a single commodity. But when all the metals needed for a standard electric vehicle battery are taken into account (see diagrams) the investment required is far higher.
Earlier this year, Canadian Bank RBC Capital Markets estimated that mining sector investment should increase to $160bn a year from the current $97bn to contain global warming. It’s a reason many have given up on the Paris Agreement’s 2015 aim, believing that 1.8°C is a more appropriate stretch target.
It is troubling that investors and mining executives aren’t on the same page when it comes to future supply. Shareholders want growth, provided it doesn’t imperil the short-term gains attached to dividend payments. Mining CEOs, however, need to think about the company over a five-, 10- and 25-year timescale. In addition, projects are hard to find.
Tin, critical for coating the copper core that connects solar modules to panels, is scarce. The market is only 300,000t in annual production, but 85% of supply is from four countries, led by China, which has political consequences of its own. China’s mines are getting older and its environmental legislation tighter. Indonesian tin production is also facing a decline. With these, a whole new question of how commodities can be sourced in a politically free, synchronous manner is raised, and left unanswered.
To hit the trajectory required for 2050 net emissions, copper production needs to be 9.98Mt a year by 2030 — a compound average growth rate (CAGR) of 14%, according to the Bank of America. In nickel, a CAGR of 40% is required, which in numbers is the production of 2.84Mt, compared with 94,983t in 2020.
It’s similar for lithium (CAGR +38%), platinum (+78%) and cobalt (+28%).
“Where is this material actually going to come from?” asks Wanblad. “It just takes so much longer to [establish] a project today than it ever has before.
“Societal expectations are very different and, as a result of that, the politics is really very different. The consequence of all those things is that it takes a really long time even if you have the resource as a project.”
— Wanblad, Woodsmith and the metals cycle
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