Miners in Africa dig deeper for cash
Mining has been central to Africa’s resurgence and an associated wave of international listings. But shareholders are now pressing the big mining companies to conserve cash. Amid talk of strikes and nationalism, can the sector handle a less voracious China?
Tom Albanese had no choice but to step down this January as chief executive of Rio Tinto, one of the world’s biggest miners. The British-Australian firm had just suffered $14 billion in impairments against its 2012 profit.
Some $10 billion of the charge related to aluminium. What appeared to tip the balance, however, was an 80% write-down on the CEO’s $3.7 billion acquisition, only two years previously, of a coal project – not in Australia, Canada, or even South Africa, but in Mozambique.
It indicates just how much excitement – and hubris – the mining industry has shown in sub-Saharan Africa, particularly outside South Africa, over the past five years. Albanese is not the only CEO of a global mining firm to have lost his job recently after underestimating the capital expenditure needed to exploit Africa’s vast, mostly untapped, mineral wealth.
Aaron Regent was CEO of Barrick, the world’s biggest gold miner, until last summer, when Barrick announced rising costs at its Zambian copper operations. Soon afterwards, Tye Burt, the CEO of a Canadian mining firm, Kinross, lost his job, largely thanks to a $7 billion dollar bet in 2010, mainly on a project in Mauritania.