NO one has yet resigned from the management team at AngloGold Ashanti but the more Dryblower thinks about what happened at the company last week the more he is convinced that someone will go, and when that happens a ripple of concern will roll through the entire mining world.

The problem at AngloGold Ashanti is a problem affecting all big mining companies and boils down to this simple question: “who’s in charge, management or activist investors?”

At AngloGold Ashanti a big share issue and corporate split designed to resolve financial pressure caused by high debt levels was proposed by management, approved by the board, and rejected by some of the company’s major shareholders.

Disputes between owners and managers can arise in all businesses but in the case of AngloGold Ashanti a $US2.1 billion capital raising, followed by the creation of a new company to hold the company’s South African gold mines was so significant that its rejection was a shattering blow.

Now, rather than pulling in fresh capital to bolster the company’s balance sheet there is talk of selling plum assets such as a 45% stake in the Kibali mine in the Democratic Republic of Congo.

Randgold Resources, the other major shareholder in Kibali, has acknowledged its interest in an opportunity to own all of the mine but its chief executive, Mark Bristow, says he will not be paying a premium for AngloGold Ashanti’s stake.

“In principle, everything has a price, but it (paying a premium) doesn’t really fit what Randgold stands for,” Bristow told the Bloomberg news service.

De-coded, what Bristow means is that while a high price for AngloGold Ashanti’s 45% stake in Kibali might be off the agenda he would love to get more of the mine at a discount.

And therein lies the nub of the problem for AngloGold Ashanti, a company being squeezed by multiple pressures that include allowing debt to expand to a damaging level at a time of falling gold prices, to be too heavily exposed to high-cost South African mines, and to be whacked by a clash between management and shareholders.

Resolving the problems at AngloGold Ashanti will be difficult, and at some point investors will start to question the long-term survival of the business unless it can make serious inroads into its debts, and break free from the stranglehold of its legacy assets in South Africa.

In some ways those are issues peculiar to AngloGold Ashanti, but the problem which is fast-becoming universal in the mining world is that of activist investors who believe they know better than management what’s best for the business.

Seasoned observers of corporate matters, including Dryblower, can understand where the investors are coming from.

In the case of AngloGold Ashanti it was US billionaire, John Paulson, who played the leading role in killing the capital raising and corporate split because he has invested several hundred million dollars in the company to amass a 6.6% stake, and he was being asked to chip in more of his cash to satisfy a management team which has much less skin in the game.

But, here comes the thorny question. Paulson, and other major investors in AngloGold Ashanti had given the company’s board and management the right to invest their money, and by an unwritten agreement, to not interfere in management’s decisions.

The game changed in the blink of an eye when AngloGold caved into Paulson’s demands that the capital issue and split be abandoned, and it could also be changing at a number of other big mining companies.

At BHP Billiton there is a mini-revolt underway with London institutions speaking out loudly against the corporate spin-off proposed by management.

The problem from a London perspective is that assets in which they currently have an interest will go into a new company to be listed only in Australia and South Africa – which are prohibited places because they limited to investing on European stock exchanges.

Failing to please a large pool of its own shareholders might not derail the BHP Billiton split but it will certainly make institutional investors wary of the next management proposal.

Rio Tinto might soon face an even more delicate problem if speculation is right and Glencore is sizing the company up as a potential takeover target.

The problem for Sam Walsh his management team at Rio Tinto is that Glencore management has been working hard to cultivate investor support.

Glencore’s $US1 billion share buy-back announced a few weeks ago is a major point of difference between it and Rio Tinto which failed to deliver the same sort of reward for its owners this year, only holding out the promise of something next year.

Unfortunately, next year might be too late for Rio Tinto because Glencore can sense that investors want rewards in the hand today, not the promise of something tomorrow.

The struggle between activist investors and management has set the scene for a very interesting time at the top end of mining.

First published in affiliated site MiningNews.net on Monday.