RATINGS agency, Moody’s, recent comment that South Africa’s Mining Charter redraft is likely to be credit negative for companies such as Anglo American – if it is adopted – is unlikely to unseat the prospect of the UK group resuming the dividend, possibly when it announces its half year figures.
Were it to do so, it would end roughly 18-months of turmoil for the UK-listed group which sold assets and released itself from the payroll of tens of thousands in an effort to weather the commodity price meltdown, now officially over.
According to Goldman Sachs, the trigger will be when Anglo wins back its investment grade rating. It lost this rating in February last year when Moody’s attached a higher risk to its restructuring efforts. “Challenging market conditions are likely to slow the pace of the portfolio transformation,” the ratings agency said, only for the commodity markets to just about start a surprising recovery.
“Our argument for previously expecting the dividend to be reinstated with the year-end results was our view that Anglo’s board would wait for the credit rating agencies to upgrade the company to Investment Grade (IG) before confirming the dividend, which we saw as a year-end event,” said Goldman Sachs.
“With two bonds recently placed with covenants similar to IG bonds and having been priced close to IG peers, we now believe the reinstatement of the dividend could occur as soon as 1H17 results,” it added.
The expectation is for a 20% payout of underlying earnings per share which, in Goldman’s view, would be about 21.8 cents per share, to be followed by a 40% payment for the second half of the year equal to 51.02 cents per share – a dividend yield of 3.6%.
The signs for this are good. De Beers’ fifth diamond sale, for instance, came in at $530m, ahead of a fourth diamond sale of $522m, although below the $564m sales figure of the fifth sale in the previous financial year.
“We see this as good result for this time of the year when sales values tend to trend down,” said Investec Securities in a note to clients. “The first five sales of the year now total $2.9bn versus $3.0bn for the first five sales of 2016 – while down 4% year-on-year this comes against the background of the Indian demonetisation program,” it said.
Moody’s added in its report, however, that the Mining Charter was unlikely to see light of day owing to a lack of clarity in its fine detail, its clear contravention of ANC and national growth policies, and the legal opposition to the document which could see the industry in protracted period of regulatory uncertainty if Government were to dig its heels in.
