South Africa’s mining investment guru Peter Major has come out all guns blazing against Australian BHP’s “opportunistic” bid for Anglo American. In this powerful interview with BizNews editor Alec Hogg, Major calls on SA’s president and mining minister to step in quickly and promise to reverse legislative mistakes which chased away global investors. Doing so, he says, will save Anglo from BHP’s clutches and turbo-charge the country’s moribund mining sector. Major believes it’s easy to fix – but requires humility and realism from Pretoria. Starting with appeals to an alienated global investment community to stop Wall Street desk jockeys killing SA’s 107 year-old Golden Goose.
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Highlights from the interview
In this interview between Alec Hogg and Peter Major, the discussion centres on critical challenges and opportunities facing South Africa’s mining sector, particularly in the context of Anglo American’s potential acquisition by BHP Billiton. The conversation delves into the detrimental impact of the Minerals Resource and Petroleum Act (MPRDA) on foreign investment, highlighting concerns about nationalization and regulatory hurdles that hinder South Africa’s attractiveness to investors.
Peter Major emphasizes the need for the government to create a more favourable investment climate by removing barriers and encouraging foreign capital inflows. He suggests that unlocking the potential of South Africa’s mineral resources requires a strategic shift in policies, moving away from restrictive measures that deter investment. The interview underscores the urgency of making South Africa an investable destination and preventing the loss of national assets to foreign ownership.
The dialogue also touches on the historical significance of Anglo American as a cornerstone of South Africa’s economy and the potential consequences of allowing it to be acquired by foreign entities. The interview concludes with a message urging government leaders to prioritize economic reforms that would enhance the country’s competitiveness and preserve its strategic assets.
Edited transcript of the interview ___STEADY_PAYWALL___
00:00:08:11 – 00:00:31:19 Alec Hogg: Well, it’s not too often that the Financial Times of London dedicates much of its focus to a South African company. But indeed, it’s done that this morning. Three stories in the FT, our partners there in London focusing on Anglo American, the 107-year-old South African behemoth being, well put into play by a bid from the big Australian BHP Billiton.
00:00:31:19 – 00:00:50:21 Alec Hogg: Billiton’s not the first time the Aussies have raided South Africa for its jewels. It did this with Gencore, which became Billiton some years ago, and we’ll be talking to our go-to man on mining, Peter Major, to find out what gives.
00:00:50:23 – 00:00:57:00 Alec Hogg: Well good evening, your time. Morning, our time, Peter. We’ve tracked you down to Idaho. What are you doing over there at the moment?
00:00:57:02 – 00:01:09:05 Peter Major: Hey, it’s not all just about gold and diamonds, you know, it’s also about Silver, Alec. I can’t say we’re the silver capital of the world anymore over here. But it’s still the world’s richest, deepest silver mines.
00:01:09:07 – 00:01:15:04 Alec Hogg: Idaho is in the northwest corner of the United States.
00:01:15:10 – 00:01:19:18 Peter Major: That’s right. It’s quite a ways from the Iowa that you always go to.
00:01:19:19 – 00:01:48:07 Alec Hogg: Yeah, a little bit. A little bit from Warren Buffett’s territory. So, Omaha, is quite a way from Idaho. But, Peter, it’s not often that Anglo American is. Well, you would, you would. Ha. It’s inconceivable, in fact, that Anglo American would be on the block would be an attempted purchase by especially by a company that was much smaller than it.
00:01:48:07 – 00:02:11:08 Alec Hogg: Not that long ago. But yesterday, in my conversation with Piet Viljoen, he said it’s a reflection of South Africa’s difficulties. On the other hand, perhaps, it’s not just the opportunistic BHP to come in. Try and buy Anglo because of the low share price, but because we are on the verge here in our country, possibly of a big turnaround.
00:02:11:08 – 00:02:27:04 Alec Hogg: We’ve got coalition politics coming in after May 29th, and perhaps that’s what’s motivating Melbourne to say, well, let’s get in now. Let’s grab them now before, Anglo does come back to its former glory, or am I just being way too optimistic?
00:02:27:06 – 00:02:51:00 Peter Major: No, I think you’re pretty close, Alec. If you look at where Anglos is trading relative to the S&P 500, you know, that’s a world-class benchmark in its trading, the second-lowest it’s ever been up until literally yesterday. And so I think BHP saw here’s a company similar to us a little bit smaller, you know, a lot smaller.
00:02:51:02 – 00:03:24:04 Peter Major: But it’s got great assets that would be synergistic with ours. And we’re not going to get a chance to get much cheaper. And people forget how well Anglo performed from inception right up until 2010, from 1960 to 2010. Anglos beat the S&P by 400%, by four times. You know, had you invested in ’60, ’61, rode out the cycles. You did amazingly well.
00:03:24:10 – 00:03:49:17 Peter Major: It was a leviathan. You know, when I went there in ’80, ’81, people were seriously worried about Anglos cornering the world mining market. I went to the Northwest Mining Conference after graduation. That was in October, November 1981, two months before I got on the plane to come here. And boy, Anglos was the talk. Gold was coming down from 800.
00:03:49:17 – 00:04:15:12 Peter Major: It was still around 600, maybe 550. And Anglos was explaining how they were drilling 3 or 4 km deep to pick up the Carbon Leader reef. That was maybe 1 or 2 in thick and help Minorco at that time was the largest investor in the United States and Minorco was just the overseas arm of Anglos. So that’s where it was.
00:04:15:14 – 00:04:28:07 Peter Major: And it’s not just history, Anglos. It’s always had good assets and whether you want the ones in South Africa or not is irrelevant. Their overseas assets on the whole are very good.
Read more: Peter Major: Mining booming in SADC, but bad ANC policies still driving it south in SA
00:04:28:09 – 00:04:39:13 Alec Hogg: So what is the rationale response from an Anglo shareholder today to BHP Billiton’s offer that pretty much everybody is saying is just an opening bid?
00:04:39:15 – 00:05:10:12 Peter Major: I, like I haven’t spoken with the government on this yet, but I have a hunch this is one of the few times Peter Major, the South African government and the trade unions are probably perfectly aligned. We don’t want Anglos to disappear. It’s a fantastic portfolio investment, as was De Beers. All of us had De Beers and Anglos in our portfolios, and sometimes you wanted to have overweighting and sometimes you wanted to have underweight.
00:05:10:14 – 00:05:35:21 Peter Major: But to me, the perfect analogy here is the average fund manager is like a kid with an ax and he’s chasing a golden goose. He knows it’s going to lay an egg every day, but he wants to get two eggs, so he can beat everybody else today. He’ll worry about tomorrow when tomorrow arrives. And so your average fund manager and definitely your average trader, they could give us stuff.
00:05:35:23 – 00:05:57:19 Peter Major: They’ll sell Anglos today for the highest bidder, just like they did De Beers, fully realizing they will never see it again. It’s gone forever. And I fought as hard as anybody when De Beers wanted to delist to keep it on board. And we can look at some of our trusted fund managers who sold the family jewels for what, a quick buck.
00:05:58:00 – 00:06:20:01 Peter Major: And you can start with Old Mutual and I can name a few others. And who did that really benefit? Sure, we made a couple extra bucks that day, and the next day De Beers was gone forever. And the same thing is going to happen with Anglos if the shareholders agree to it. But I don’t think the majority shareholders are going to agree to a takeout.
00:06:20:03 – 00:06:29:21 Peter Major: And I certainly don’t think the big holders like the IDC, the PIC and I’m hoping there’s a couple large fund managers out there that see further than the end of the day.
00:06:30:03 – 00:06:53:13 Alec Hogg: What can the South African government do to block this, though? We’ve already heard, well read in the Financial Times, that Gwede Mantashe has said BHP didn’t do well by us with the Billiton deal. They certainly don’t feel very warm and fuzzy towards them. So, as a South African government, BHP’s on the wrong side to begin with.
00:06:53:18 – 00:07:00:10 Alec Hogg: But what can the South African government, if anything, do to block a deal that was given that Anglo is listed in London or headquarters?
00:07:00:12 – 00:07:35:18 Peter Major: Well, that’s the big difference. Now, this isn’t a case of Walmart coming into South Africa and taking over, Makro where the government just laid down rule after rule, condition after condition, term after term. This is an overseas company that has a couple assets in South Africa. And what’s going to stop it? You saw BHP, they said our bid is based on Anglos selling or unbundling their South African assets.
00:07:35:18 – 00:07:45:20 Peter Major: Now, we saw that was Thugela right. That was Anglo American unbundling its coal assets. There’s no law against that. In fact, I think it made a lot of people rich.
00:07:45:22 – 00:07:46:08 Alec Hogg: Yeah.
00:07:46:08 – 00:08:16:17 Peter Major: But there’s a reason you’ve got mining houses. Commodities are volatile. Ernest Oppenheimer figured that out before. I should say he figured it out. Whereas Rhodes didn’t, had Cecil Rhodes lived a little longer, he would have figured out, I gotta put something else in with De Beers to counterbalance it out. And Rhodes actually was a founder of Consolidated Goldfields, so he was working in that direction when he died at age 49.
00:08:16:19 – 00:08:39:02 Peter Major: Ernest Oppenheimer spent his life in diamonds up until 1917, when it was 1915, when he got chased out of Kimberley. He was mayor, the largest employer, and they started accusing him of being a German, and he got chased out, almost got killed, ran to Cape Town, was waiting for a boat. He was heading back to England. But his brother said, wait before you go, come up to Johannesburg.
00:08:39:02 – 00:09:05:07 Peter Major: Maybe we got to look at gold. So, Oppenheimer started with gold, but he saw that without Rhodes, the diamonds weren’t being managed properly. He took them on, and he no sooner had diamonds. And he said, I’ve got to balance this portfolio more. I’ve got to get copper. And so these individual companies, Kumba Amplats, Thungela, they’re eventually going to wish they were in a mining house.
00:09:05:07 – 00:09:09:11 Peter Major: They’re probably eventually going to be in a mining house if they want to live.
00:09:09:13 – 00:09:37:09 Alec Hogg: And that is from a South African perspective. The great mining house is Anglo American. It still is, very deeply invested here was looking through some of the data. 50% of the assets are in southern Africa. And if BHP Billiton wants to come in and almost cherry-pick the other assets, the Non-south African assets, and then leave the rest here, where does that leave the country?
00:09:37:09 – 00:09:40:00 Alec Hogg: Where does that leave Anglo shareholders?
00:09:40:01 – 00:10:02:13 Peter Major: It’s up to Anglo shareholders what they want to do. Do they want to take this? How can government prevent it? Look, this government’s got a hell of a lot of power. You know, this is a more centralized government than the previous regime 30 years ago. The PIC can go in there and they can buy up shares because their vote counts.
00:10:02:13 – 00:10:33:06 Peter Major: The IDC, they could do it in alliance with a few big institutions. Now, if our government had good relations with overseas investors, they could have talks with them saying, let’s do something about this. But I don’t know that our government has very good relationships with overseas investors. I think it’s the opposite. Like I think they’ve gone out of their way to say, I don’t like to say the word piss off foreign investors.
00:10:33:06 – 00:10:55:22 Peter Major: But there’s people who say, yeah, that’s what they’ve done. You see now they need foreign investors, you know, now they need to be on good terms with some large merchant banks. And that’s how companies grow. That’s how Anglo American grew. They were on good terms with everybody the Swiss, the Germans, the French. That’s where all that money came in to build these gold mines.
00:10:56:01 – 00:11:25:19 Peter Major: I think our government’s slowly learning that, but not fast enough. They need allies here if they want to preserve what was a pure South African company that built this country like nobody else, nothing else, employed a million people. And those were good, real jobs with perks, benefits, blue sky futures. So, government must look in the mirror, see what they’ve just about completely destroyed and say, is it worth us trying to save it?
00:11:25:21 – 00:11:33:04 Peter Major: It’ll never be what it was with what we’ve left. But we can preserve it and make it better than it is now.
00:11:33:06 – 00:11:58:15 Alec Hogg: Well, at least Gwede Mantashe’s immediate reaction was one of, we don’t want this deal to happen. So, so yeah, it’s a starting point. But I’m I’m reminded here about what the Australians did to Wilson Bailey Homes, South African construction Company Wilson Bailey had about 50% of its assets of its revenues being generated in Australia by its Australian construction arm.
00:11:58:17 – 00:12:24:11 Alec Hogg: And it’s relevant here because BHP Billiton, of course, is the big Australian-based company in Melbourne, and the Australian government refused to allow Wilson Bailey to sell its construction company to the Chinese. Had it done so, Wilson Bailey shareholders would have been rich, everyone would have been happy. But that business, that large business, went bankrupt as a consequence of it not being able to be sold to the Chinese.
00:12:24:13 – 00:12:47:12 Alec Hogg: Now we have a situation here in South Africa where an Australian company is effectively raiding a South African national jewel. In many ways, it’s been around for so long and our government should be it should just stand by and to let it happen. Surely what’s good for the goose, and you mentioned the golden goose to begin with, is good for the gander.
00:12:47:13 – 00:13:19:06 Peter Major: Well, government’s job is to protect the national interest, to do what’s in the population, best interests. And I know they haven’t done much of that in 30 years that I can see, but it’s never too late to start. And there’s a lot they can do. They can’t. As we said earlier, they can’t pull what they did on Walmart coming in to take over Makro, you know, just load it with more and more conditions.
00:13:19:08 – 00:13:44:06 Peter Major: But they can appeal to the shareholders that they currently are responsible for, for the PIC, the IDC, few other government parastatals, the unions, you know, National Union of Mineworkers, their pension fund, and they can still talk to parties overseas that are large holders and say, do you really want to see this disappear? Because it’s a very unique asset.
Read more: BHP’s bid for Anglo American: A game-changer in copper mining
00:13:44:08 – 00:14:14:13 Peter Major: What it doesn’t do, unfortunately, anymore, Alec, is grow local industries. When I went to the Anglo 100-year anniversary seven years ago, you know, huge large tent for lake and wine farm, there must have been 40 tables there. Each table had at least two, maybe three heads of Anglo companies, you know, Mandy, I can’t remember the ones at my table.
00:14:14:13 – 00:14:45:02 Peter Major: You know, I think two out of the three at my table, I didn’t even know. And all those people, all those CEOs or were battle-hardened veterans that were top-notch managers, you know, good financial CA’s Good legal background, good mining background. And that’s what Anglo American did. And Nicky Oppenheimer gave a very nice, very short speech. He could have gone longer to say our job here was to build businesses.
00:14:45:02 – 00:15:08:06 Peter Major: We started out building mines and we ended up building more than mines. And boy, did they. And why would any government want to tamper with a company like that? You know, what an engine for the country it was. And unfortunately, Anglos hasn’t been doing that. That’s one of the reasons it’s smaller, it’s been unbundling all those children that it raised in.
00:15:08:06 – 00:15:25:04 Peter Major: They grew up and they matured and did well. But the other reason is they stopped growing, you know, they’ve closed many more mines here than they’ve opened. And that’s not the Anglo that we knew. That’s not the Anglo that grew this country and raised its living standards for everybody.
00:15:25:06 – 00:15:52:20 Alec Hogg: It seems almost like a Greek tragedy. All of this because the South African geography still has, as we’ve discussed many times in the past, fantastic minerals under the ground. But they aren’t being exploited because the laws that regulate them and the processes are just not incentivizing anyone to exploit it. Particularly not your big South African being Anglo American.
00:15:53:00 – 00:16:07:04 Alec Hogg: So if you could advise the South African government on how to turn this around, how to get back to having a champion that employs a million people in the country. How would you do that?
00:16:07:06 – 00:16:44:14 Peter Major: Geez. It’s easy Alec, you know how many times Amcal applied to the government to get a power generation license. So that they could burn their dust so they could burn their tailings dams that were full, the fines that they couldn’t be transported. Can you imagine that government, given a go-ahead, build your coal-fired power plant using the latest technology, the clean, efficient technology, you know, raise your boiler efficiency can you imagine if the government had let the iron ore consortium, not just Anglo, the Iron Ore Consortium and Manganese Consortium take over the Saldanha railroads.
00:16:44:16 – 00:17:01:19 Peter Major: You know, that’s what Rio Tinto, BHP, and Galway have done. And look what they do to the ports and the railroad. You know, they double and they triple their iron ore production. All that money comes into the country and let the coal producers take over the Richards Bay line, not just the port, but the line as well.
00:17:01:21 – 00:17:19:02 Peter Major: You know, this government doesn’t have to do anything except take their hands off the wheel because what they’re doing, they got a death grip on the wheel and they’ve cranked it to the left, and that’s going over the edge. If they would just take their hands off the wheel and let the wheels go straight again, these aren’t big things.
00:17:19:02 – 00:17:40:11 Peter Major: And yes, throw out the MPRDA because there’s there’s no other country that has anything like it and there’s no other country that likes it because it’s illogical. It doesn’t make economic sense. It doesn’t make ethical sense, it doesn’t make moral sense. And when I say there are 4 or 5 big things, hell will be up to 9 or 10% growth like Rob Hersov says by the end of the first 12 months.
00:17:44:10 – 00:17:47:13 Alec Hogg: What is the MPRDA? For those who don’t know.
00:17:47:15 – 00:18:20:00 Peter Major: That’s the Minerals Resource and Petroleum Act. And I’m glad you brought that up, Alec because it was leaked out by the infamous Trevor Manuel in 2002, around June, just as I was going on holiday. It was leaked out and our mining index fell 35%. Because what did it say? We were going to nationalize the mines. Less than ten years after Mandela got on the Parliament steps to say we will not nationalize the mines.
00:18:20:00 – 00:18:40:20 Peter Major: They did an about-face and they nationalized mines. But Trevor said, hey, this was only a discussion document. But two years later to the day, the real document came out and it was just like the discussion document. Okay. That time, I think Anglos only fell about 25% and it took it two years to get back up. And that was in a raging bull market.
00:18:40:22 – 00:18:54:14 Peter Major: So that’s what the MPRDA did to this country. Foreigners could see hell, they’re nationalizing assets and throwing in a thing called BEE. It is uninvestable no matter how high the raging metal prices go.
00:18:54:16 – 00:19:19:11 Alec Hogg: And that’s 20 years ago. And here we have the consequence. So from your perspective, Peter, Anglo American should not be allowed to be bought by BHP Billiton. It should be turned around. The government can do it simply by taking its hands. It’s a death grip, as you call it, off the wheel. And it will benefit and grow and address many of the issues that the South African economy is facing at the moment.
00:19:19:11 – 00:19:21:18 Alec Hogg: And I am summarizing it well.
00:19:21:20 – 00:19:45:15 Peter Major: Yeah. Very good. I’d like to see Gwede and Cyril get on the podium together and appeal to all shareholders. Please don’t accept the bid. We are going to make this place investable again. We’re going to get off the shackles. The horrible legislation that prevents people from investing here. We’re going to encourage foreign investment, something we haven’t had for 20 years.
Read more: Anglo American rejects BHP’s unattractive, opportunistic $39bn takeover bid
00:19:45:17 – 00:19:54:19 Peter Major: And that would give people reason. Hey, let’s hang on to the Anglos because they can go that thing. We’ll go from 600, 800 to 1000 if you get the shackles off of it.
00:19:54:21 – 00:19:59:08 Alec Hogg: And if you don’t do it, the Australians will be owning this asset. South Africa’s oldest, strongest company.
00:19:59:10 – 00:20:09:04 Peter Major: Yeah, they’ll pack up that goose take out two golden eggs and the goose is gone forever. And you can you can put BHP in your portfolio and that’s it.
00:20:09:10 – 00:20:15:08 Alec Hogg: Peter Major is our man on mining. Your company is called Mergence Peter.
00:20:15:10 – 00:20:17:15 Peter Major: Modern corporate solutions. We had to have a name change.
00:20:17:15 – 00:20:19:15 Alec Hogg: I always get that one wrong. So let me get that right.
00:20:19:15 – 00:20:23:14 Peter Major: You bring yourself at the times emergence to modern.
00:20:23:16 – 00:20:32:13 Alec Hogg: From Mergence to modern, modern corporate solutions. He’s busy all over the world, but primarily in Cape Town. And now he’s in Idaho. Where in Idaho?
00:20:32:13 – 00:20:37:03 Peter Major: Pete Kellogg, Idaho, home of the richest deepest silver mines.
00:20:37:05 – 00:20:58:07 Alec Hogg: Okay, looking after silver there, hopefully, you’re going to be doing a lot more work in South Africa. If Gwede and Cyril just listen. Just take the cotton wool out of their ears put it in their mouths. And don’t let this national asset disappear. That’s the message from Peter Major And I’m Alec Hogg from BizNews.com.
Read also:
- BHP will need to sweeten up offer to win over Anglo: Chris Hughes
- Anglo American’s triumph to turmoil as BHP moves in
- BHP’s ‘unbundle’ demands on bid for Anglo is an indictment on SA economy – Piet Viljoen
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