ANGLO American said the sale of its metallurgical coal mines in Australia are the least challenging part of a radical restructuring in which it plans to unbundle its stake in platinum miner, Amplats, and sell or demerge De Beers.
Anglo CEO Duncan Wanblad, who announced a broad-ranging strategic review of the group in February, said he hoped to complete the restructuring in around 18 months – a timeline analysts say is ambitious because it is not without its complications.
The restructuring also helps Anglo fend off an all-share takeover proposal from BHP, twice rejected by the UK-listed miner.
Wanblad said BHP’s proposal which also includes the unbundling of Anglo’s stake in Kumba Iron Ore, but seeks to retain De Beers (in the short-term) and the coal mines, carried major execution risk. Only after the demergers are complete will BHP be able to press for the takeover of Anglo, in terms of its plan.
“We believe that Anglo American’s proposal has its own execution risks not least its own plan to “demerge Anglo Platinum in a responsible way” and to exit steelmaking coal and diamonds for value over time,” said Bank of America analysts this week.
It took BHP the best part of three years to exit its thermal coal mines in Australia compared to Anglo’s much narrower timeframe. But Wanblad said he had no qualms over selling the mines.
“I can’t comment on timing of deal,” said Wanblad in an interview on Tuesday. “What I am confident of is that we will be able to do it in time frame we say we can do it,” he said. “I am reasonably optimistic that the steelmaking coal business will move quicker than the rest of the portfolio.”
Anglo produced about 16 million tons of metallurgical coal last year from five mines situated in Queensland, including the Moranbah and Grosvenor mines. “I have no intention of breaking up business,” said Wanblad of the steelmaking coal unit. “I intend to sell it as a going concern.
“That business has great assets in it; a great management team and will be extremely sought after. We are not a forced seller, there is interest in the business and I have a high level of confidence in business as laid out this morning (May 14).”
“We are somewhat surprised to see coking coal included as non-core, but this is the most ‘monetisable’ asset,” said Deutsche Bank in a note to clients. Based on recent transactions, Anglo might be able to sell the mines for between $3bn and $5bn, the bank said.
But the sale of De Beers might be trickier to conclude as it would be at the bottom of the diamond cycle. As for Amplats, it’s not known whether Anglo would do this in bite-sized pieces given the possibility of flow-back in terms of shareholders not permitted to hold shares in platinum group metals or with 100% exposure to South Africa.
Once completed Anglo would be valued at about £32 per share, according to a note by Jefferies. “This assumes Anglo can execute on this strategy without substantial value leakage, which is questionable,” it said.
“It is also possible that BHP comes back with a revised offer in the neighborhood of £30 per share which we view as close to full value. Either way, we expect the Anglo share price to go higher and therefore reiterate our Buy rating at the current price,” it said.
