Anglo American’s revamp has an inauspicious start
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Antony Currie
MELBOURNE, July 1 (Reuters Breakingviews) -Anglo American's AAL.L seven-week-old restructuring plan has just been dealt a severe blow. The $41 billion company’s Australian coking coal unit was supposed to be the easiest unit to offload as part of an overhaul quickly pulled together in response to rival BHP’s BHP.AX takeover attempt. A methane fire at its most profitable pit, though, makes a swift sale at a decent price much less likely. That will increase the pressure on CEO Duncan Wanblad.
The stars appeared to be aligned for finding a buyer for the business. Several similar deals have already been struck, including Glencore’s GLEN.L impending purchase of 77% of Teck Resources’ TECKb.TO coking coal division valuing it at $9 billion. And much of what Anglo’s asset digs up is the highest-quality variety of the rock used in steelmaking. All else being equal, it could be worth at least $5 billion, or 4 times 2025 EBITDA, Breakingviews calculates. A successful deal would bolster Anglo and Wanblad ahead of trickier transactions for its South African platinum operations or De Beers, its struggling diamonds business.
Trouble is, the Grosvenor mine where the fired started on Saturday is the jewel of the coking coal business, accounting for almost a third of its overall value, per Jefferies. It is likely to be closed for months once the flames are extinguished, Anglo has warned. That may be optimistic: it was offline for almost two years after a similar incident in 2020.
That wouldn’t close off all M&A options. Anglo could sell the remaining mines piecemeal, for instance. That would probably suit smaller local players like Whitehaven Coal WHC.AX and Stanmore Resources SMR.AX that might baulk at buying all of them. Or it could sell the whole caboodle to, say, BHP at a lower price but perhaps with some schmuck insurance in case operations pick up quicker than expected.
Neither is ideal for Wanblad, though. He needs to extract as much value from hiving off parts of Anglo, as soon as possible, to demonstrate that his overhaul could be better for shareholders than selling the entire company to BHP. If Plan A doesn’t work, he may have to consider alternative ways to demonstrate value, such as selling a stake in the group’s prized base metals business. Grosvenor’s underground conflagration is an inauspicious start, and makes future Plan Bs more likely.
Follow @AntonyMCurrie on X
CONTEXT NEWS
Anglo American is trying to put out an underground fire that started on June 29 at its Grosvenor mine in Queensland, Australia. The company expects the pit, where coal used in steelmaking is extracted, to remain closed for months once the flames are extinguished.
All employees were evacuated without injury or loss of life.
As of 0828 GMT, Anglo shares were trading at 24.43 pounds, down 2.3%.
Anglo's burning mine is its most valuable https://reut.rs/4cDqfpj
Editing by George Hay and Streisand Neto
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
