Out of Focus

The recent decision by Cynthia Carroll to step down from the helm of Anglo American, highlights the pressure that shareholders and boards are putting on mining CEO’s. The fact that higher prices are no longer bailing out bad decisions is only partially responsible for the recent departures of some high profile executives. We suspect that much of the impetus to make a change has been driven by a desire on the part of shareholders to make executives more short-term focused (ROE, ROC). While the industry has historically sought growth for growths sake, this mentality is clearly out of favor particularly given the severe underperformance of the sector over the past 12-18 months.  What we find interesting is that this potential shift towards more short-termism, will only exacerbate the supply challenges in the event of a normalization of demand.  Low prices cure low prices, but sometimes low prices can lead to a lack of vision and strategic thinking; the end result being a much higher and  more volatile price environment.