Anglo unmoved on £405m Sirius Minerals bid, saying tilt at fertiliser developer “fair”

Mark Cutifani, CEO, Anglo American

ANGLO American CEO, Mark Cutifani, stood by his group’s 5.5 pence per share takeover offer for Sirius Minerals declaring it to be “fair and reasonable”, and batting away criticism the bid was prejudicial to the company’s large flank of retail shareholders.

“We are in middle of a takeover offer so we are somewhat constrained [in what Anglo can say], but our offer takes into account future investment needs and project needs,” said Cutifani during a year-end results media conference today. “Our offer is fair and reasonable. I suggest you read the Sirius chairman’s advice to shareholders and beyond that, we will let people speculate.”

Sirius Minerals hit on difficult times last year when trying to finance the development of Woodside, a fertiliser project situated in North Yorkshire. The project requires initial capital funding of £300m which Anglo said it would undertake in a phased fashion over two years were its offer for the company a success.

Woodside contains billions of tons of polyhalite from which fertiliser products can be produced – an area of the market Anglo said offered significant market growth.

Russell Scrimshaw, chairman of Sirius Minerals, said in a letter to shareholders on January 20 that Anglo’s cash offer of £405m represented “a stark choice” between acceptance or  the prospect of the company going into administration “within weeks”.

Unveiled on January 8, Anglo’s bid was a 34.1% premium to the closing price of Sirius Minerals’ 4.1p/share close of the previous day, but UK hedge fund Odey Asset Management – which owns 1.29% in Sirius Minerals – said in a letter this week that Anglo’s pitch undervalued the company.

“If Anglo wish to retain the option to counter bid, Odey accepts that rationality, and hence also commits today to vote in favour of any bid at seven pence or above,” said Odey. The deal needs approval of 75% of shareholders at a special meeting on March 3 to proceed.

There were no plans to offer retail shareholders a share option but Anglo’s Cutifani said the firm understood the importance of Woodside to the North Yorkshire community. “If successful we bring certainty that isn’t there for project and community, said Cutifani. “We hope could play into concept of ‘the northern powerhouse’, said Cutifani, a reference to UK prime minister Boris Johnson’s pledge to devolve more power to the north of England.


Anglo today published solid full-year results of 2.81 cents/share although net debt crept up $1.8bn to $4.5bn, roughly 0.5x of earnings before interest, tax, depreciation and amortisation (EBITDA), the ratio the market views as an indication of the firm’s ability to cover its debt.

“We don’t expect growth in the net debt number,” said Stephen Pearce, CFO of Anglo. “On a long-term consensus price basis, we would see some subtle growth,” he added.

Anglo is embarking on a capital intensive phase next year with the development of its $5bn to $5.3bn Quellaveco copper mine in Peru. Anglo is funding 60% of the mine expected to yield 330,000 tons/year of copper.

Anglo announced a $1bn buy-back of shares at the interim point of the 2019 financial year, but it would appear from Pearce’s comments that additional payouts were unlikely. “We will consider capital allocation every six months, but we take all factors into account such as capital projects. We are going into peak Quellaveco next year so 40% of earnings [as per the dividend policy] should be expected.”

The total dividend came in at $1.08/share, a shade above the previous year’s payout of $1/share. Of the buyback, roughly $950m in shares had been to bought with completion likely by end-March.

Anglo posted underlying EBITDA of $10bn, a 10% year-ob-year improvement. Just over half of EBITDA was derived from the firm’s 80% stake in Anglo American Platinum, and its iron ore assets including Kumba Iron Ore.

Both iron ore and platinum group metals – palladium and rhodium in particular – were set for continued strong pricing this year notwithstanding the outbreak of COVID-19. Cutifani said the group didn’t currently expect a major impact as a result of the virus. “We think this is more of a short term issue.

“The differentiating news for us is that we are less reliant on China that most of our competitors,” he said, adding that of all the metals and minerals in its portfolio, iron ore and diamonds might be most affected.

“China is 15% of total demand for diamond [demand]. There are not as many people walking around jewellery shops in China or Hong Kong, so it [COVID-19] will have an impact. But we have had a good US selling season and sentiment seems to have been better in the first sight,” he said.