Home Commodities Glencore boss backs South Africa as Anglo takeover battle intensifies

Glencore boss backs South Africa as Anglo takeover battle intensifies

by SuperiorInvest

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Glencore Chief Executive Gary Nagle issued a strong defense of South Africa's mining sector as speculation continued that the Swiss commodities house could still mount a rival bid for all or part of Anglo American.

In a rare statement of support for South Africa's mining industry from a chief executive, Nagle praised the tax regime and said the country's infrastructure and energy problems were manageable.

“If we look around the world, we have seen changes in royalties across the board except South Africa. They have not touched royalties or taxes,” he said Tuesday at a conference in Miami. “Yes, it has infrastructure and energy problems, but the industry can work together to solve them.”

Nagle added that there have been “strong recent improvements” at state rail operator Transnet. “We believe Transnet will pursue a public-private partnership and continue to improve.”

His comments came hours after Anglo, one of South Africa's most famous companies, announced it was breaking up to thwart a £34bn bid from Australian rival BHP.

Mining has long been the bedrock of the South African economy, but in more recent years the sector has struggled, beset by power outages, crumbling infrastructure and labor disputes.

In response, several foreign mining companies have reduced or abandoned their operations in South Africa, and BHP's offer – which includes better terms on Monday – excludes Anglo's iron ore and platinum businesses in the country.

    Gary Nagle
Glencore's Gary Nagle praised South Africa in unusual comments for a CEO © José Cendon/Bloomberg

BHP, which spun off its own South African operations in 2015, has said the structure of the deal does not reflect a negative view of the country as an investment statement. The South African government, however, criticized the decision to exclude South African assets.

Glencore has extensive operations in the country and strong relationships with the government. Nagle is a South African citizen who emerged through Glencore's South African coal business, as is former CEO Ivan Glasenberg, who remains the company's largest shareholder.

Those connections and other potential synergies between parts of Glencore and Anglo have led some investors to suggest Glencore would be a better potential buyer than BHP.

Glencore has not commented on whether it is considering any approach. It is the most naturally acquisitive of the large mining companies, having been built by Glasenberg, who preferred to buy existing assets rather than develop new mines.

Retraced share price line chart in pence terms showing Anglo American shares have underperformed its rivals since the start of 2023.

Mining analysts at Berenberg wrote on Tuesday that they still expected Glencore to take action. “We would also expect that at some point Glencore would show its hand and probably put forward its own proposal to merge with Anglo American.”

In South Africa, Glencore is unlikely to want to acquire Anglo's platinum operations. Glencore does not produce the metal and when it merged with Xstrata in 2013 it inherited a stake in South African platinum producer Lonmin, which it later sold.

By contrast, Anglo's South African iron ore business, Kumba, would be attractive to Glencore, shareholders and analysts have said.

Glencore does not produce iron ore, but it markets around 100 million tonnes a year and is eager to grow.

“It's a great business that provides value to customers,” Nagle said at the conference.

When Glencore sells iron ore to a customer, it can often sell them other steelmaking ingredients at the same time, such as nickel, metallurgical coal and manganese, he added. “The benefit of having iron ore in the portfolio is not only to make money, but also to provide those customers with the products they need.”

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