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AngloGold Ashanti CEO delay shows failure in leadership planning

By David Whitehouse
Posted on Monday, 21 June 2021 18:12

Anglogold Ashanti holds a 45% stake in the Kibali gold mine in northeast Democratic Republic of Congo. REUTERS/Pete Jones.

AngloGold Ashanti’s long delay in appointing a permanent chief executive and the lack of transparency surrounding the process point to deeper failures of corporate governance, analysts say.

The company, that was the world’s third-largest gold miner by production last year, has been searching for a new CEO since Kelvin Dushnisky announced his resignation in July 2020. It has both an interim CEO, Christine Ramon, and an interim CFO, Ian Kramer. Ramon was CFO until Dushnisky’s departure.

Chris Griffith, appointed as CEO of AngloGold Ashanti’s rival Gold Fields in January, said then that he hadn’t had an interview for the AngloGold job – and that no-one else had been interviewed either. In February, Ramon said the board was treating the appointment with “urgency” and that the process was “well advanced”.

The slowness of the CEO appointment is compounded by a lack of visibility on when this news is coming.

Nothing visible has happened since then. Part of the problem is that the Covid-19 pandemic and the mobility restrictions that come with it have left some candidates preferring to play safe and stay put, says Raj Ray, director of metals and mining research at BMO Capital Markets in London. But the long delay still shows a “lack of succession planning,” he says.

AngloGold Ashanti’s African assets are in Ghana, Guinea, Tanzania and the Democratic Republic of Congo (DRC). It also has mines in Australia, Brazil, Colombia and Argentina. The company, which has its headquarters in Johannesburg, no longer mines gold in South Africa having sold its last remaining assets there to Harmony Gold in 2020.

The company has a lot of C-suite executives who are approaching retirement, argues Ray. But there are not many established candidates who could take their place.

  • The problem is a wider one confronting the whole mining industry, Ray says.
  • While mining is an integral part of energy transition, ambitious young executives may focus only on the dirty aspects, he adds. “It’s a perception issue.”

Visibility lacking

Gold miners have lagged surging stock markets as the price of gold in US dollar terms has fallen 7% since 1 January. Shares in AngloGold Ashanti have lost 26% of their value this year, and now stand at their lowest since April 2020 on a modest forward PE ratio of 7. Gold Fields stock has restricted losses to 11% this year, while shares in Newmont, the world’s largest gold miner, are little changed.

AngloGold Ashanti stock has a long record of underperforming both industry peers and the price of gold, says Peter Major, director of mining at Mergence Corporate Solutions in Cape Town. Executive pay needs to be realigned with share price performance, he says.

  • “What exactly have AngloGold shareholders been getting for the huge expense of their large senior management team these past 20 years?”
  • The pay structure for executives and non-executives is “unlikely to change because it’s a system that’s been in place since the break away from Anglo American over 20 years ago,” Major says.

The business has quality assets with an operating team that has remained intact, Ray says. As interim CEO, Ramon has been a steady hand and a “good handle on operations,” but she lacks previous experience in facing and winning over investors, he adds.

  • The company is still involved in a dispute in the DRC, where it operates in a partnership with Barrick Gold, over the right to repatriate profits. Resolving that dispute would mean that “one of the key risks goes away,” Ray says.
  • Even if that happens, “a few things need to change” from the investor perspective, Ray says.
  • The slowness of the CEO appointment is compounded by a lack of visibility on when this news is coming. “That uncertainty hasn’t gone down well with investors.”
  • “I like the portfolio but at present it’s hard to justify being invested in the company.”

Bottom line

The shares are cheap for a reason and will likely stay that way unless a convincing CEO appointment is made.

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