[miningmx.com] – ANGLO American could favour an unbundling of its 69.7% stake in Kumba Iron Ore but it would keep its options open to a trade sale, said the UK group’s CEO, Mark Cutifani.
“If you assume an unbundling as a base case then that’s probably a safe bet,” he said in an interview adding, however, that no firm decisions had been taken regarding the divestment of the asset.
Cutifani also said that the potential sale of Kumba had not been factored into the $3bn to $4bn in disposals earmarked over the next 12 months. “There needs to be a conversation with all the stakeholders,” he said. “If you do anything with unbundling, the [South African] government is going to want minimal debt,” he said.
“Anglo American and Kumba will work together to evaluate options for the exit and how the business can be set up as a standalone entity that will create sustainable value for its stakeholders,” Kumba said in a separate statement. “Shareholders will be updated on further developments in this regard,” it added.
Shares in Kumba were about 8.5% higher in Johannesburg today taking gains over the last 30 days to about 50% and valuing the company at R13.4bn or $850m.
Cutifani said Kumba would be debt free by the end of the year and that it was unlikely to fail debt covenant tests as the iron ore price would have to fall to $25 per tonne when mid-year tests were conducted. Spot iron ore is currently trading at about $46,3/t.
The conclusion of the divestment of Kumba would not be until mid 2017 at the earliest, Cutifani said.
Earlier in the day, Cutifani fleshed out and expanded on proposals in December to pursue a more aggressive restructuring of the group saying $2bn more in disposals had been targeted while the firm would be free cash flow positive in 2016.
These proposals included selling all of Anglo’s bulk mining operations including iron ore and coal, extending the process to the South African coal export mines and the attached export entitlement through Richards Bay Coal Terminal.
One of the complexities attached to the sale of Kumba is the fact that just under 20% of the company is owned by Exxaro Resources. It said last year it may see changes to its own 51% empowerment structure which would affect Kumba’s credentials.
But Cutifani said that Anglo had established a long track-record for black economic empowerment (BEE) in South Africa. “I don’t think our BEE position is a major problem,” he said.
“Anglo has made the majority of BEE companies in South Africa and the relationships we have established will stand us in good stead. But we will do the right thing,” he said.
BEE, however, is complex. The company has spent more than a year trying to divest of its 49% stake in Atlatsa Resources, a black-controlled platinum producer which owns Bokoni Mines in the Bushveld Complex.
Cutifani said Atlatsa was “more difficult” because the platinum sector was “a tough place to be”.
“I couldn’t say where we are with that process at the moment but Chris [Griffith, CEO of Anglo American Platinum] is managing that process. The last time I spoke to him about it he said there was constructive work going on,” said Cutifani.
