Anglo American’s worst mines are delivering a windfall.
Iron ore and coal prices were among the hardest hit during the commodities rout and have bounced back strongly. Now that the mines are profitable instead of bleeding cash, Anglo is scrapping plans to sell some of its biggest assets, according to people familiar with the matter.
During the depths of the commodities crisis, when investors were questioning whether Anglo could survive, the firm unveiled a dramatic turnaround plan to unload assets and pay down debt. As metal prices steadily climb higher, those fears are long gone and Anglo is preparing to report its first annual profit increase in five years.
"With all these commodities being up right now, they are trying to milk as much cash as possible," Yuen Low, an analyst at Shore Capital Stockbrokers, said by phone.
"They might be hoping that prices will stay strong for longer than most people think."
If Anglo waits too long and commodity prices retreat, the company 'could then be again faced with the problem of asset disposals in a seller-unfriendly environment
If Anglo waits too long and commodity prices retreat, the company "could then be again faced with the problem of asset disposals in a seller-unfriendly environment", Low wrote in an e-mailed note on Thursday. "But at least the company’s debt pile would [hopefully] be significantly reduced."
The shares fell 3.1% by 12.16pm in London, the biggest decline in the FTSE 100 index. Still, the shares have more than tripled in 12 months amid the raw-materials recovery.
Anglo plans to keep assets including a Brazilian nickel mine and the giant Minas Rio iron ore operation, according to people familiar with the company’s strategy.
Anglo also plans to keep metallurgical coal assets in Australia and its stake in Cerrejon mine, Colombia’s largest thermal coal exporter, they say.
The change in strategy will be discussed at board meetings and announced when Anglo reports full-year results on February 21, according to the people, who asked not to be identified because the information is private.
The company is still reviewing options for reducing its exposure to SA. That could include selling or spinning off its majority stake in Kumba Iron Ore as well as coal mines serving both international and domestic customers.
CEO Mark Cutifani has said Anglo will likely pay a dividend next year and may consider expanding through deals in the future.