One can understand what Tony Trahar, the former CEO of Anglo American, intended to do when he shortly after his company was registered in the UK in 1999, located its office in St. James, an expensive area in London.
Surrounded by buildings created by John Nash, an architect of the Regency era, Anglo's head office at Carlton Terrace, 20 seems to proclaim that this broadly walking mining company can confidently hold its positions alongside representatives of the Blue Blood of the City : Rio Tinto and BHP Billiton.
It did not seem to matter that companies like Rio Tinto put up for sale their elegant offices off St. James Park in the fashionable Mayfair district, or that BHP Billiton had placed its premises a stone's throw from the A202, conveniently located with Argos, Discount network of mixed goods.
Carlton Terrace stands out sharply and goes to St. James Park, sharing the same advantage with Buckingham Palace, although Anglo's neighbors, located in House 18, were in the headlines in 2013 when they sold their property for £ 250 million - it became The most expensive housing in the country.
Of course, at the time of Anglo's arrival in the UK, the mining sector was at the peak of a breathtaking and rapidly developing market characterized by a price increase trend driven by China's economic growth, and economists compared this development with the revival of Germany in the 1950s , Only on a larger scale. This was not at all like the present times, when there is a tightness in the means.
For example, BHP Billiton was able to become one of the sponsors of the 2008 Beijing Olympics, an event that was described as the "first appearance" of China, when mining companies tried their best to supply refrigerators, hairdryers and washing machines to millions of people in China's newly grown middle class. Beijing invested in railways, ports through which its minerals were supplied to ensure production.
Sponsorship of the Beijing Olympics was an active and ambitious marketing, which is completely unthinkable at the moment, as China's economic growth slows down, turning the supernova of the mining sector into a black hole in less than three years.
It was against this background that Mark Cutifani, Chief Executive Officer of Anglo American, made his statement.
"We are looking for a room that is more suitable and economically feasible," he said, referring to the significant decrease in the size of London offices of Anglo. "St. James is a very expensive place for a mining company," he added.
It's just a moving head office - something that companies do all the time, but it also figuratively reflects the industry's rollback back.
Although the decision by Quifithani to sell the Anglo corporate jet plane two years ago could also be seen as a means to attract attention, like the spear cast by a newly appointed Australian - a fighter against prejudice towards Anglo culture, targeting the most affluent sections of society, but moving the office , Is caused by the need for survival.
The harsh reality is that Anglo will need a smaller office space after it carries out tough measures to cut spending by $ 500 million, of which $ 300 million will be achieved by reducing thousands of jobs at a rate of 46% of the organization's total staff.
In total, the group's intermediate results last month brought both good and bad news. The interim dividend was surprisingly preserved, and net debt fell significantly to $ 11.9 billion, but there was also a write-off of Anglo's coal and iron ore assets of $ 4 billion - a common situation in the entire sector that only a small number of companies managed to avoid.
BHP Billiton announced on July 3 to write off its assets for $ 3 billion - a move caused by the continued decline in metal prices during the year, which analysts believe should reflect the "entry of the mining industry into the recovery phase" after the economic crisis in it.
Instead of entering the phase of recovery, there was an acceleration in the decline in prices for metals and stocks. For Anglo, each of its minerals or metals was cheaper in the first half of this year, and some, such as nickel, had a lower margin (20%), while coking coal and iron ore were lower in margin at 14%; Copper ore by 10%; Platinum ore by 11% on an annualized basis.
In such market conditions it is virtually impossible to work. Analysts clearly point to China, as it is turning from an economy driven by investment into an economy where consumer demand is the driving force.
CHANGES IN CHINA
The significance of this transformation can be explained by returning in 2002, when China joined the centralized investment program.
Typically, economies are built on a higher GDP per capita, which leads to an increase in the taxes collected, which in turn allows the government to spend money, for example, on the construction of infrastructure, water supply, sewerage and roads.
But in China, this process was somewhat different in that resources were concentrated in Beijing, allowing it to create infrastructure at a much faster rate and at earlier stages of the GDP growth cycle per capita than in other large economies.
The problem of mining companies that have plunged themselves into a major expansion in order to meet the requirements of this economic growth is that because of the "hangover the next morning after a party" can only split the head. This is because China consumed the main production of mining in the amount of 40% -70% of the total world volume, while its economy is only 13% of the world's GDP.
"In China, the volume of goods per capita is higher than in many developed economies, and we believe that the forecast shows GDP growth rather at the expense of consumer demand, rather than at the expense of investment demand," Goldman Sachs said in a recently released report. It predicts normalization over time.
But at the moment, it seems, it is difficult to achieve "normalization".
The weakening of metal prices caused volatility. Iron ore lost 25% in a week in the middle of July, its maximum prices for a single product show a sharp fluctuation. She to some extent returned the previous positions, but this was enough for Kumba Iron Ore to decide to temporarily suspend the payment of its dividends.
This was bad news for Exxaro Resources, which mainly deals in coal mining, but has a 19 percent stake in Kumba, which last year easily secured a dividend of several billion rand.
But now the company has declared its inability to pay dividends on its own, or even worse - about the inability to fulfill its obligations to banks.
Strengthening the capacity of its flagship on Main Street 333 required a loan of R400 million to refinance the structure of its own debt. Thus, the problems of one company are added to the problems of the other.
In his interview to the Miningmx edition, Coutifani expressed surprise at the continued weakening of the metals market this year. "We did not expect that there would be such a serious deterioration in the situation. I think that concerns about China are quite reasonable. Maybe it's a belated decision, but we probably need another six months to fix the situation. This is not a disaster, "he said, adding that" ... we always tend to go too far in the mining sector. "
Probably, the point of view of Quitiphany is somewhat colored by the fact that for others, the change in the economy of China is not so much a catastrophe as a necessary development process. In the long term, the economy, driven by consumer spending, is naturally considered mature; And this is actually quite positive for companies like Anglo American Platinum (Amplats) and De Beers (a diamond mining company, 85% owned by Anglo American), which are affiliates of Anglo American, part of whose proceeds are based on the sale of jewelry. Both companies have long defined the growing middle class of China as an important new market.
"In general, the consumer-driven economy is very well suited for jewelry and platinum," said Chris Griffith, chief executive officer of Amplats.
"This is a good result for platinum, but at the moment we are seeing a very volatile economy, of course, for iron ore and steel," he said. "It's hard to see much of the daily business, but now I would say that we are on an unstable territory."
Bruce Cleaver, the head of strategic development for De Beers, said the group was not "terribly concerned" about the economic downturn in China, but he nonetheless acknowledges that this is a significant factor for the diamond-diamond Market.
"China is the world's second largest and most interesting market, taking into account its potential growth and the impact it has on diamond jewelry," he said in a telephone interview.
"There are a large number of middle-class families, and people continue to marry, taking into account the fact that Chinese people buy diamond rings only for weddings, and not for engagement," he said. "We see more and more wealthy Chinese buying diamond jewelry outside of China in countries such as Japan and South Korea, probably because the currency is weaker there. Therefore, of course, large commodity-related businesses are rethinking the situation, but in our view, as China's economy grows, it is more in the phase of consumption. "
http://www.miningmx.com/page/news/markets/1653476-Anglo-switch-an-emblem-of-industry-in-reverse#.VcsC_ybtmkp
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