ANGLO American was making “good progress” in the divestment of its South African thermal coal assets through a demerger and listing in Johannesburg – most likely before the year-end – but other options were being weighed, the group said today.
“We do have people putting their hands up to which we are giving due and proper consideration,” said CEO Mark Cutifani when asked if a trade sale of the South African thermal coal assets was a viable alternative to a demerger.
“The demerger route is still the most likely, but I wouldn’t rule out a trade sale,” he said, adding that a buyer would have to meet operational and governance standards, especially given the enormous scrutiny given to carbon-heavy assets.
Anglo American produced 16.5 million tons from its South African coal assets during its 2020 financial year, a 7% year-on-year reduction, producing a $15m underlying EBITDA loss, and taking EBITDA losses over two years to $20m.
South African coal contributes 3% of group EBITDA and has a mine life of about 13 years which is less than the average life of mine held by the company of some 25 years).
Anglo broke even at its Colombia coal operations which consist of a one-third stake in the large Cerrjeon mine, held with BHP and Glencore. Cutifani said he anticipated Anglo making a decision on its Cerrejon investment in two to three years. “We have partners and that is a different conversation,” he added.
Anglo reported strong full-year numbers. Earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $9.4bn for the year ended December – beating consensus by $400m. There was a beat, too, on earnings per share which at 253 US cents was 10% above consensus. A final dividend of 72c/share was announced, a 53% improvement year-on-year.
Strong contributions from the group’s copper, iron ore, and platinum group metals (PGM) assets drove performance, with thermal coal and diamonds struggling. Basic headline earnings per share of $2.47 compared to $2.74 in the comparative period. Net debt came in at $5.6bn equal to 0.6x in terms of EBITDA to net debt.
Cutifani was guarded on the metals and minerals market. The narrative currently being spun is that demand is so high that another super-cycle had begun.
“I have been in the industry for 44 years and I have seen cycles and supercycles. Demand is strong and supply is relatively constrained because of less than required capital investment, but we are keeping our feet on the ground,” he said.
“We can’t be seduced by good prices,” he said.
Glencore said at its year-end investment update that it would be entirely carbon neutral by 2040, including its Scope 3 emissions – those produced by end-users. Cutifani said he was reluctant to get into “an arms race” in achieving carbon neutrality.
“I don’t feel the pressure on Scope 3,” he said. “There are about 10 different methodologies for calculating Scope 3 but we want to define Scopes 1 and 2 (emissions by own assets and those of suppliers) and have a plan.