ANGLO American’s restructuring programme took another small step forward today after it announced it had agreed to sell its 70% interest in the Foxleigh metallurgical coal mine in Australia.
The buyer is a consortium led by Taurus Fund Management with the transaction effected through a sale of shares in the subsidiary companies holding Anglo American’s interest, the UK-listed group said.
Foxleigh is an open cut coal operation which produces high quality pulverised coal injection coal. Anglo American’s attributable share of Foxleigh’s saleable production was 1.86 million tonnes in 2015.
The sale was unlikely to be sufficient to have a material impact on either the balance sheet or on valuation, said Goldman Sachs in a morning note. It added, however, that the development was “a small positive” for Anglo’s restructuring plans.
“The bull case on Anglo is reliant on successful asset sales in order to reduce debt and rationalise production around core assets and evidence of progress on this front should be seen as a small positive, although failure to release terms will not alleviate concerns that asset sales of non-core assets in the current market will be tough,” it said.
Anglo said in February it would more aggressively address the high level of net debt on its balance sheet to less than $10bn by end-2016 from $13bn end-2015, and to $7bn in the medium term.
It would achieved this through targeted asset sales of between $3bn to $4bn in 2016 as well as improving cash flow $1.9bn through productivity and cost improvements this year.
On March 22, Anglo also announced it had bought back $1.8bn in bonds which would reduce net debt by $130m and save it $190m over three years including interest repayments.
“This is a limited production base and whilst we doubt that the deal will amount to a meaningful sum for the company, we view it as a small positive on the route to disposal of non-core assets,” said Investec Securities.
The disposal programme was “based predominantly” on the disposal of its Niobium and Phosphate businesses as well as long wall coal operations, said Investec.
