AngloGold CE’s exit gets measured response as analysts weigh Vedanta’s intentions
The measured response of analysts and investors to the departure of veteran AngloGold Ashanti CEO Srinivasan Venkatakrishnan, who is due to head Vedanta Resources, contrasted with the emotional farewell he was given at the company.
Venkatakrishnan’s decision to leave AngloGold, the largest gold miner by market capitalisation on the JSE, also raised questions in the market about the timing of his appointment to India’s diversified miner.
Vedanta’s poker-faced executive chairman Anil Agarwal has bought options to a 21% stake in London-based diversified miner Anglo American through his family-owned company. He has played down speculation about his intentions with Anglo, a company he once courted for a tie-up with Vedanta. Anglo spurned the overture and since then Agarwal has steadily accrued a potential stake in Anglo, essentially leasing shares from other investors with the option to buy the stock.
"Venkatakrishnan has long had a good reputation in South African mining circles," said SP Angel’s John Meyer. "The move is interesting considering Agarwal’s option agreement on 21% of Anglo American shares with JP Morgan. It feels like Venkat’s move is somehow related."
Give Venkat credit. It’s not often you have a CEO who lasts this long and then has a track record of fixing a broken company and delivering on promises in a tough environment of lower prices and mad politics in countries in which the company operates
Agarwal gave little away in announcing the appointment.
"Venkat is a widely respected business leader in the global resources space, who brings to Vedanta impressive values and a wealth of experience in corporate and other roles in the UK, Africa, Australia, South America and India," he said, using Venkatakrishnan’s nickname.
"He also has a strong track record managing a complex portfolio of operating assets and projects across Africa. He has proved his ability to deliver significant operating and financial improvements, while also ensuring important advances in sustainability," he said.
His appointment, which starts in September, comes after Vedanta searched for a new CEO for about a year before settling on Venkatakrishnan, who has been with AngloGold for 18 years, five as CE.
Venkatakrishnan’s decision was greeted with dismay by staff in the Johannesburg head office and he was given a standing ovation after addressing them about his departure.
One analyst questioned why Venkatakrishnan would give up a clear role at AngloGold for one at Vedanta under an executive chairman and owner of the company with a range of interests from zinc, oil and gas, aluminium, power and copper.
Venkatakrishnan delivered on the "key aims" of unwinding a damaging hedge book, reducing debt levels, disposing of and curtailing loss-making operations, returning to positive free cash flows, adapting to a lower gold price environment and reinstating dividends after a three-year hiatus, said Macquarie analyst Yatish Chowthee.
"We note these milestones have materialised under his leadership and … the business is in much better shape."
The strategy included reducing its once substantial South African footprint and historical home to just one mine and a tailings retreatment operation in the quest for low-cost, high-margin operations.
"Give Venkat credit. It’s not often you have a CEO who lasts this long and then has a track record of fixing a broken company and delivering on promises in a tough environment of lower prices and mad politics in countries in which the company operates," said an analyst who declined to be named, referring to SA, Democratic Republic of Congo and Tanzania.
"I believe they will make an internal appointment. [Chairman] Sipho Pityana was very clear about keeping AngloGold going as it is," the analyst said.