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Posts Tagged ‘ownership’

De Beers appoints new chief executive

May 17, 2011 Comments off

“De Beers has ended a prolonged leadership search by hiring a French engineering executive with no experience in diamonds, mining or South Africa. The South Africa-based diamond miner appointed Philippe Mellier as chief executive on Monday. Mr Mellier pursued a career at Ford Motor and Volvo before becoming president of Alstom Transport, the train-making division of the French engineering group.

Nicky Oppenheimer, De Beers’ chairman and guardian of his family’s 40 per cent stake in the company, told the Financial Times that experience in the diamond industry was not an important part of the selection process. ‘We have plenty of experts at running mines. We have plenty of experts in marketing diamonds,” he said. “The key thing is that Philippe has run world-class operations and substantial capital projects, and has experience dealing with joint venture partners.'”

Source: Financial Times, May 16 2011

Observations:

  • De Beers is the world’s second largest diamond miner, with operations mainly in Botswana and Canada. It mined 33mln carats last year. Anglo American holds 45% of De Beers shares.
  • In Mellier’s previous job he was president of Alstom’s transport division with €5.8bln annual sales. Joining Alstom in 2003 his key activities in the first years were to divest non-core businesses, while the company had to be bailed out by the French government. In later years he achieved success in winning government contracts for transport systems and buying into a Russian producer.

Implications:

  • The fact that an industry-outsider with experience in partnerships has been recruited indicates the board’s strategic priority for the next 5 years: strengthening ties with the Botswana government and probably setting up other partnerships to expand.
  • A key challenge for Mellier and Anglo’s Cynthia Carroll will be to decide on potential simplification of the ownership structure of De Beers. A potential buyout by Anglo American or flotation of the company to provide funds for expansion have been discussed for years. Whatever decision made, it will have to be aligned with Botswana’s government, which holds 15% of the company but receives a large part of the profits.

©2011 | Wilfred Visser | thebusinessofmining.com

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Chinalco not planning to sell Rio Tinto stake

April 5, 2011 Comments off

“Chinalco, the Chinese aluminium group, has no plans to sell down its shares in Rio Tinto, viewing the mining house as a key strategic partner as Chinalco expands overseas. ‘We can’t go out to fight alone,’ said Chinalco chairman Xiong Weiping, explaining that co-operation with global miners was essential for overseas development. ‘With Rio being one of the top mining companies in the world, Chinalco can learn a lot from them, including in operational management, asset operation and risk management.’

Chinalco is seeking to move into mining to take advantage of the commodities bull run that has been created by China’s huge demand for raw materials such as iron ore, copper and coal. Mr Xiong outlined their plans to expand from their core aluminium business, which has struggled to make profits, into a global mining house. He said he was hunting for high-grade copper, bauxite, iron ore and coal resources, the minerals that China needs to fuel its urbanisation. ‘Our target areas are mainly countries next to China, for example south-east Asia, Mongolia and central Asia,’ said Mr Xiong.”

Source: Financial Times, April 3 2011

Observations:

  • Aluminum Corporation Of China Limited, Chinalco, and Chalco are often used interchangeably, as they are basically the same company. Chinalco is the state-owned holding company of Chalco, which is listed on various exchanges with a small part of ownership.
  • Chinalco signals its interest in partaking in the Oyu Tolgoi copper project in Mongolia, which is operated by Rio Tinto. Until now Rio Tinto has held away potential contributors to the project.

Implications:

  • With China’s mining sector growing in international importance it would be no more than logical if some of the largest diversified miners in the world in 10 years time are from China. In the domestic struggle to be this player state support will be crucial. Chinalco is positioning itself to be the Chinese diversified miner and desperately needs strong international connections to support this claim.
  • In the short and mid term the strategic stake of the company in Rio Tinto certainly is a symbiotic relationship, as demonstrated by investments in Africa and exploration partnership in China. However, if Chinalco grows into an international diversified miner as it is planning, in the long term the companies will become fierce competitors. At this point the stake in the Australian company will certainly cause conflicts.

©2011 | Wilfred Visser | thebusinessofmining.com