THE sale of Anglo American’s remaining metallurgical coal assets in Australia came in above expectations and boded well for the group’s restructuring plans, analysts said.
Anglo announced on Monday that it would sell the remainder of its 15 to 17 million tons (Mt) a year coal mines for $3.8bn in a cash deal with US group, Peabody Energy.
Including the November 4 sale of its Jellinbah East and Lake Vermont mines in Australia to Zashvin for about $1.06bn the total consideration for its metallurgical mines could be about $4.8bn – well in excess of the $3bn to $4bn previously estimated by analysts.
A portion of Peabody’s sum was contingent, however.
An upfront payment of $2.05bn and deferred cash settlement of $725m was agreed with the US firm, but the balance of the $3.8bn turns on the re-opening of Grosvenor, damaged in June following an underground fire, and certain price-linked conditions.
UBS analysts said in a note this week that Peabody forecast metallurgical coal production to increase from seven million tons in 2024 to between 21Mt and 22Mt in 2026 “implying a quick restart of Grosvenor”.
All in all, Anglo’s restructuring plans, announced in May amid a takeover proposal by BHP, had suddenly gained real momentum. “We see Anglo American executing on its announced restructuring plan and see further catalysts from here,” said analysts at Bank of America.
One of the major catalysts is the further sale of shares in its listed subsidary Anglo American Platinum (Amplats), announced by Anglo.
An additional 6% of Amplats would be sold in an accelerated bookbuild – equal to 16 million shares – the group announced on Tuesday. Were the shares sold at Amplats’ closing price today, it would raise about R9.59bn for Anglo.
Including the previous placement of Amplats shares, completed on September 11 and raising R7.2bn for Anglo, the second book build would increase Amplats’ free float of shares by 50%, Anglo said.
Shares in Amplats have gained about 18% since completion of the first book build even though platinum and palladium prices are 1.3% and 6% weaker respectively.
“This placing will consolidate the benefits of our prior sell down by further mitigating the potential impact of flowback by creating increased trading liquidity, while further strengthening our business as we take another major step towards portfolio simplification through our world-class positions in copper, premium iron ore and crop nutrients,” said Duncan Wanblad, CEO of Anglo.
“Given Amplats’ strong balance sheet, we see potential for a buyback to manage flowback or special dividend pre demerger to de-lever new Anglo,” said UBS.
Anglo was also making progress with the sale of its nickel assets, but the sale of De Beers, the final piece in the restructuring jigsaw, might take longer to materialise.
One mote of good news was that finalisation of a new marketing agreement with Botswana had improved following the election of Duma Boko, head of the Umbrella for Democratic Change coalition as the nation’s new president on November 1.
Boko was quoted as saying Botswana had to protect its diamond “nest egg”. He commented that: “The relationship with De Beers could have been damaged by the way the negotiations were handled,” referring to former Botswana president Mokgweetsi Masisi.
