Grosvenor suspension could delay sale of Anglo’s met coal mines

ANGLO American’s plans to sell its metallurgical coal mines in Australia could be delayed by the suspension of mining at Grosvenor, one of the division’s operations.

The UK-listed group announced on Sunday (June 30) that following an underground coal gas ignition incident on June 29 production at Grosvenor, in Queensland, had been suspended, possibly for several months.

Analysts at Morgan Stanley said the production outage could run into 2025 – a development that “is likely to delay the sale process of the met-coal business” Anglo is planning as part of a restructuring.

Announced on May 14, the restructuring identified the sale of the group’s 15 to 17 million tons a year metallurgical coal division, as well as the unbundling of Anglo’s majority shareholding in Anglo American Platinum, and the sale of its 85% stake in De Beers.

Selling metallurgical coal was seen as “the most imminent transaction,” said Morgan Stanley. The suspension “may last until the full extent of the damage is assessed and the regulators clear the mine to restart,” the bank said.

Grosvenor’s 3.5Mt in guided production is only about 1% of the global seaborne metallurgical coal market (and 1.5% of the hard coking coal market) but significant enough to tighten the market “at margin”, said Bank of America. A consequent increase in prices might offset some of the impact of lost production for Anglo, the bank said.

“All else equal, the outage should bring forward the timing of expected tightening in the market balance,” said the bank.

Previous 2024 guidance for Anglo’s coking coal production was between 15 and 17 Mt. Analysts have lowered their expectations to 15Mt in production. Said Bank of America: “While this is not positive news, we dont think it is material enough to derail the broader value release story at Anglo”.

The production suspension does add some complexity, however.

Grosvenor is built to a five million tons annual capacity but its production has not exceeded 3.5Mt since restarting longwall mining in early 2022 following the extended closure after the May 2020 explosion, due to challenging strata conditions.

Shares in Anglo have drifted back towards levels before BHP’s takeover proposal (£21/share) which was leaked to the market on April 24. “The failure of Anglo shares to rally towards the final bid price reflects the market’s concern that it will not deliver this value, we think,” said Richard Hatch, an analyst for Berenberg.

Shares in Anglo traded 2.6% weaker in London by midday. They were last quoted at £24.49/share, about 24.5% stronger year-to-date and 5% higher on a 52 week basis.

Anglo said in its announcement regarding Grosvenor that the mine’s workforce was safely evacuated without injury and that all emergency protocols were followed.