[miningmx.com] – ANGLO American is to sell its 100% stake in Australian thermal coal mine, Callide, in a transaction that perhaps provides evidence the UK group is seeking to respond to investor criticism it hasn’t restructured quickly enough.
Anglo said it had entered into a share sale agreement with Batchfire Resources although there were still conditions precedent before it was completed. It did not specify the deal consideration.
Callide consists of an open pit thermal coal mine and associated processing infrastructure that produced 7.6 million tonnes (mt) of coal in 2014 (and 5.6mt in the first nine months of 2015), the majority of which (4.7mt in 2014) was sold to two adjacent power stations under long term contracts.
On January 12, Anglo put the finishing touches to the sale of its Tarmac business after divesting of Tarmac’s Middle East operating joint ventures to a subsidiary of Bouygues Group, the French industrial company.
A week later, shareholders in Sibanye Gold approved the purchase of Rustenburg Mines from Anglo’s 80%-held listed subsidiary, Anglo American Platinum (Amplats) paving the way for regulatory clearing later this year.
There were also reports that South32 could be one of several companies with an interest in Anglo’s niobium and phosphates businesses which it said it was trying to get away for about $1bn – half of the $2bn in assets it wanted to sell.
Goldman Sachs said in a report today that although Callide was a small mine there was strategic benefit to the transaction announcement.
“No details on any consideration is given at this point and the mine is relatively small (c. 7.6mtpa of production). The mine has been for sale for some time but the move will highlight that Anglo is following through on its commitment to rationalise the portfolio,” said Goldman Sachs. “A small positive from a strategic perspective,” it said.
However, analysts continue to be critical of the group’s restructuring plans with Deutsche Bank the latest to weigh into the debate about whether Anglo CEO, Mark Cutifani, was moving quickly enough.
It said in a report published after Anglo’s investor update in December that although it agreed with the form of Anglo’s strategy, including holding the dividend, the $2bn disposal target was insufficient.
“Planned disposals would reduce debt by $2bn, but we believe a doubling of this is
required in combination with faster cost out progress to move the balance sheet back
into a more comfortable position,” it said.
Taking net debt down to $10bn would leave net debt as a proportion of earnings before interest, tax, depreciation and amortisation at x 2.5 compared with x 4 today.
“In our view, there is a lack of commitment from management to a clear time frame and details to achieving this debt reduction – in addition, we think the market now needs to see actual delivery of the plan,” it said.
In a negative development, Bloomberg News reported that De Beers may have to cut diamond prices by up to 7% – a “concerning development” if it applied to all types of rough diamond, said Investec Securities.
“Anglo is in need of cash to bolster its balance sheet and has likely built up considerable inventory [of rough diamonds] over 2015 having suffered significant deferrals at auctions over the course of the year,” said Investec.
