[miningmx.com] – ANGLO American would seek the opportunistic sale of mines following completion of an asset review launched last year, but that its $500m investment in the manganese assets of Samancor had not been earmarked for divestment, said the group’s CEO, Mark Cutifani.
Responding to questions following the publication of the group’s interim results ended June 30, Cutifani added that the sale of six platinum assets already identified as non-core might not be completed by the end of 2015.
Anglo posted a 10% year-on-year decline in operating profit of $2.9bn but registered a vast improvement in attributable interim profit which came out as $1.46bn compared to $403m in the 2013 half-year results. The interim dividend was maintained at 32 US cents per share.
On the measure identified by Cutifani as a key ratio – return on capital employed (ROCE) – the group’s performance deteriorated year-on-year to 10% from 11% and was well adrift of the two-year 15% target. “It was never going to be a linear improvement,’ said Cutifani.
“We have completed the asset review and have made decisions on seven assets – Lafarge Tarmac and the six platinum assets,’ said Cutifani. “Others [assets] have been earmarked for potential exit, but we will look for the right opportunity,’ he said.
“We are not in fire sale mode. We will take the right opportunities to move out of those assets so that where they land they will be successful. We have not made final calls on a number, but we will be opportunistic,’ he said.
The sale of its 40% stake in South African manganese producer, Samancor, valued by one analyst cited by the Wall Street Journal at $530m, was not on the cards, however.
“We are not planning any discussions on selling or buying [Samancor]. It’s ROCE is north of 20%,’ said Cutifani. “We like manganese and we like our position and expect to continue as we are. We are not selling the asset.’
Analysts said that they expected wide-ranging asset sales from Anglo in line with the activities of its peer group, such as Rio Tinto and BHP Billiton, which have responded to shareholder calls for better returns by simplifying their portfolio spread.
However, Cutifani said there were no plans to sell the Brazilian nickel producer, Barro Alto whilst the $22m profit booked on the sale of certain coal assets in South Africa was merely a function of tidying up mineral resources.
Said Cutifani: “80% of the top 15 assets are hitting their planned numbers. They are the key drivers. All of our major commodity businesses have exceeded their production targets for the year: themal coal, met[allurgical] coal, De Beers, copper, nickel, niobium and phosphates’.
However, the sale of six platinum assets, which include four shafts in Rustenburg, Union section, and the Pandora joint venture held with Lonmin, might not be concluded speedily.
“I know Chris [Griffith, CEO of Anglo American Platinum] has earmarked the end of 2015, but that may be optimistic. I wouldn’t hard wire that as things are always a bit complicated. If it takes longer, it would have been the right call,’ said Cutifani.
“On platinum, the work we have dedicated ourselves to over next few months is stakeholder engagement and to get everyone comfortable with the approach,’ said Cutifani who added that it was important to have communities “comfortable’ with the sale process.
Commenting later in the presentation to analysts, Chris Griffith, CEO of Anglo American Platinum (Amplats), which is 80% owned by Anglo American, said in the absence of selling the shafts “… listing or unbundling them is a very real option for us.”
He added the group had received “… expressions of interest from people who have money and from those who don’t”.
Anglo American also announced today that it had reached a binding agreement for the sale of its 50% stake in cement producer Lafarge Tarmac for £885m, a transaction that would help bolster the balance sheet.
Cutifani said the group’s balance sheet was “in very good shape’ and added that with certain portfolio changes “… we are pulling ourselves together’.
As of June 30, however, net debt increased to $11.5bn versus $9.4bn at end-December and could have been higher had Anglo not deferred some of its investment in its Minas Rio iron ore project in Brazil to its 2015 financial year.
Anglo has identified sustainable net debt of between $10bn to $12bn but forecast that net debt for the 2015 financial year would increase to $15bn, about $1bn lower than forecast for that year six months ago. “We are continuing to spend on Minas Rio and Grosvenor so the capital base is increasing without benefit of revenues which aren’t due until 2016 and 2017,’ said Cutifani.
Commenting on the lower ROCE, Cutifani said reaching 15% was “… never going to be a linear improvement’ and added that the ratio would have been at 15% at the half-year were it not for lower prices which took 3% off ROCE (or $1bn in underlying operating profit), while the five-and-a-half month strike at platinum subtracted another 1% off ROCE.
For the second half of the financial year, there were some potential challenges. “We are sailing into some headwinds such as De Beers seasonality and Kumba [Iron Ore] still has a lot of work to do,’ said Cutifani, adding that prices may be lower and the platinum mines affected by the strike action had to ramp up to full production.
