June 3, 2003
By Ann Crotty
Johannesburg - Stockbroking group Barnard Jacob Mellet (BJM), which has described the Competition Tribunal hearings into Anglo American's bid for control of iron ore group Kumba as bizarre, said it would give further ammunition to all those foreign investors who regarded business in South Africa as something fraught with risk and government intervention.
In a note to fund managers, BJM analyst Michael Bedford said South Africa was fortunate to have a patient multinational such as Anglo operating so many assets in the country and willing to invest in significantly more.
The report stated the fact that Anglo chief executive Tony Trahar was willing to spend time giving evidence to a Competition Tribunal already separated him and the group from its peers, who would surely have given short shrift to such proceedings.
The report recommended not only that Anglo be given the go-ahead to buy 100 percent of Kumba but that it also be allowed to buy Assmang's iron ore operations in the Northern Cape.
This, said the report, would enable Anglo to create the synergies required to compete with Brazilian and Australian iron ore mines. Any worries about local pricing of iron ore products would easily be monitored.
Last year Kumba produced 28
.3 million tons of iron ore, of which 19.9 million was exported. Some 8 million tons were sold to Iscor in terms of a 25-year agreement, which specifies Iscor's buying price at cost plus 3 percent.
At last week's hearing Trahar said the acquisition of Kumba would be a significant start to Anglo's ambition to become a global iron ore player.
He added "we would see Kumba double in size, it might take 10 years to 15 years to reach that and it would include Hope Downs in Australia."
Trahar noted that Kumba had a market capitalisation of around R8 billion and debt of R2 billion. He said that expansion could cost R14 billion.
Anglo, which has operations in Australia, could partner Kumba in this expansion.
The BJM report referred to the Industrial Development Corporation's apparent desire to support a highly fragmented industry owned by various empowerment groups with Anglo coming along as a minority shareholder but probably expecting it to pay for all expansions and run the operations.
A fund manager said that for Anglo the most attractive part of Kumba was the iron ore deposits it owned in Australia.
But it would also wanted to do something about developing the Northern Cape assets
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