Strength from iron and coal
Anglo American’s disposal strategy has not gone as far as expected, making investors uncertain about its direction
The surge in the prices of coal and iron ore, two commodities that Anglo American wanted to exit, provided most of the firepower to pay down its debt and resume paying dividends six months sooner than expected.
The group announced a US48c/share dividend for the six months to June and a new policy of paying out 40% of underlying earnings. Shareholders were delighted, pushing the shares up almost 5% to R211.51 after the announcement.
In the depths of the commodities downturn, Anglo CEO Mark Cutifani announced a major restructuring of the group to focus on "core" commodities of copper, diamonds and platinum. This would entail sales of assets in SA such as coal mines, some of the platinum mines and selling or unbundling the stake in Kumba Iron Ore, as well as disposing of assets elsewhere like niobium, phosphate, coal in Australia and nickel. In the six months to June, Anglo earned 24% of revenue from De Beers, 16% from metallurgical coal, 15% from platinum group metals, 14% each from thermal coal and iron ore, 12% from copper and 5% from "other". A quarter of capital was spent in SA and 18% elsewhere in Southern Africa. Now that Anglo’s balance sheet has strengthened, Cutifani appears to be staving off a decision whether to keep or sell. "We’re very confident that over time we can continue to navigate and be successful in SA," Cutifani said. "What we want to see is more certainty."Shoaib Vayej, portfolio manager ...
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