Anglo boosts platinum margins after relaunching customer ties

Anglo American has boosted its platinum margins by as much as 5 percent after relaunching its customer relationships and ending an exclusive marketing contract with Johnson Matthey, CEO Mark Cutifani said on Monday.

Big miners are looking for ways to add shareholder value and extend a recovery that has made them the top gainers on London's blue chip FTSE share index this year. Anglo American's shares have rebounded more than 270 percent since January.

CEOs have mostly ruled out large-scale deals to acquire new businesses following last year's commodity price crash that left them having to sell assets to drive down debt.

"What I want to do and what we have been doing is to apply lessons," Cutifani told Reuters. "The lessons of how you connect with your customers."

Following Cutifani's appointment as CEO in 2013, Anglo American ended a relationship under which Johnson Matthey had sold all Anglo American's platinum directly to customers.

In return for a guaranteed buyer, Anglo American sold at a discount to the spot market. Now it sells at a slight premium.

Cutifani said there had been a 5 percent shift in the realised price of some of the platinum Anglo American sells, 3 percent overall and in other cases 2 percent.

The impact on cash flows translates into a bigger overall boost.

"A five percent improvement in realised prices on a margin of 25 percent is a 20 percent improvement in the value of the company," Cutifani said, adding he was speaking in general terms, not just for platinum.

Anglo American also set up a marketing business in London and Singapore and transformed its customer relationships, Cutifani said.

Platinum's prime uses include catalytic converters in cars and jewellery, which can borrow almost directly from the approach of De Beers' and its "A Diamond is Forever" advertising strategy.

"What we've said in the Indian market is you buy gold when you get married, but when you fall in love you buy platinum," Cutifani said.

Copper is the other commodity on which Anglo American is focused.

The techniques that work for platinum and diamonds do not help to sell a metal whose standout quality is being an excellent conductor.

"We see the opportunity to do better on copper, but the improvement is not as significant," Cutifani said, adding it could add 2-to-3 percent to the margin.

One way is to blend products. If gold, often found with copper, is below a threshold level, Anglo American cannot sell it, but a blend can take the gold presence above the threshold, effectively boosting the price for which the copper is sold.

Cutifani's strategy of keeping a core group of assets in which it is a global leader and gradually selling assets in bulk industrial commodities has been challenged by some shareholders, notably the biggest, South Africa's state-owned Public Investment Corp.

Cutifani said he continued "to engage very constructively with all of our shareholders".

Anglo American's core commodities have barely moved compared with a more than 200 percent rise in coking coal and a roughly 30 percent climb in iron ore this year.

Platinum prices have risen some 10 percent in 2016 to roughly $980 an ounce, but are trading at less than half their 2008 peak. A Reuters poll last week forecast a modest uptick in 2017.