Glencore chief backs South Africa as Anglo takeover battle rages

Glencore chief executive Gary Nagle issued a robust defence of South Africa’s mining sector as speculation continued that the Swiss commodity house could yet mount a rival bid for all or part of Anglo American.

In a rare statement of support for South Africa’s mining industry from a chief executive, Nagle praised the tax regime and said infrastructure and power problems in the country were manageable.

“If you look around the world, we have seen changes in royalties across the board — except for South Africa. They have not touched royalties and taxes,” he told a conference in Miami on Tuesday. “Yes, it has issues on infrastructure and power, but the industry can work together to deal with that.”

Nagle added that there had been “recent strong improvements” at state-owned rail operator Transnet. “We think Transnet will go to a public-private partnership and will continue to improve.”

His comments came hours after Anglo, one of South Africa’s most storied companies, announced that it would break itself up to thwart a £34bn bid by its Australian rival BHP.

Mining has long been a bedrock of the South African economy but in more recent years the sector has struggled, beset by electricity outages, crumbling infrastructure and labour disputes.

In response, several foreign mining companies have reduced or exited South African operations, and BHP’s offer — including improved terms on Monday — excludes Anglo’s iron ore and platinum businesses in the country.

BHP, which demerged its own South African operations in 2015, has said the deal structure does not reflect a negative view of the country as an investment declaration. The South African government, however, has criticised the decision to exclude the South African assets.

Glencore has extensive operations in the country and strong relations with the government. Nagle is a South African national who rose up through Glencore’s South African coal business, as is former chief executive Ivan Glasenberg, who remains the company’s biggest shareholder.

Those connections and other potential synergies between parts of Glencore and Anglo have led some investors to suggest Glencore would be a better potential buyer than BHP.

Glencore has not commented on whether it is considering an approach. It is the most naturally acquisitive of the mining majors, having been built by Glasenberg, who favoured buying existing assets over developing new mines.

Mining analysts at Berenberg on Tuesday wrote that they still expected Glencore to make a move. “We would also expect, at some point, Glencore to show its hand and likely submit its own proposal to merge with Anglo American.”

In South Africa, it is unlikely Glencore would want to acquire Anglo’s platinum operations. Glencore does not produce the metal and when it merged with Xstrata in 2013 it inherited a stake in South African platinum producer Lonmin, which it later sold.

In contrast, Anglo’s South African iron ore business, Kumba, would be attractive to Glencore, shareholders and analysts have said.

Glencore does not produce iron ore but trades about 100mn tonnes a year and is keen to grow.

“It’s a great business that provides value for customers,” Nagle said at the conference.

When Glencore sells iron ore to a client it can often sell them other steelmaking ingredients at the same time, like nickel, metallurgical coal and manganese, he added. “The benefit of having iron ore in the portfolio is not just from making money, but providing those customers with the commodities they need.”