Anglo’s defence plan: Offloading De Beers; unbundling AngloPlat; selling Coal 

By Alec Hogg

Anglo American Plc has delivered a strong riposte to BHP’s hostile takeover bid, announcing the unbundling of Anglo Platinum, demerging De Beers and selling its remaining Coal assets.

In the future, it will focus on three areas: copper assets focused in South America, high-quality iron ore, including the retention of Kumba, and fertiliser through the development of its Woodsmith project in England.  

In a global media conference call from London this morning, CEO Duncan Wanblad said the group will be radically restructured and simplified, with execution completed before the end of 2025: “We are fully committed to this. This is daylighting the value of our assets. This is the right strategy for Anglo American.”

This plan completed the decades-long transformation of the “old” Anglo-American, created in 1917, which was built on South African diamonds, gold and, more recently, platinum and coal.

Its South African exposure will be limited to the controlling stake in Kumba, which was acquired in 2003 after the formerly State-owned Iscor was unbundled.

Despite the historic significance of the decisions brought on by the BHP takeover bid, Wanblad was upbeat in his presentation this morning, “selling” the story to the international media on the basis of its financial enhancements.

The CEO said it will increase EBITDA margins by 15%, raise the operating cash conversation ratio from 54% to 78%, and lift its return on capital from 18% to 25%. Wanblad said he would have preferred to wait until after South Africa’s elections on May 29, but the BHP takeover bid forced him into this early announcement: “I would have done in it a completely different time frame – engaged the South African government stakeholders in a very different way, private way, been more respectful to the South African situation today.”

Wanblad said “We are not leaving South Africa in any shape or form. We remain there. Anglo American is not gone from SA. It is potentially stronger for SA as we are creating two SA companies in De Beers and Anglo Platinum that will be able to reach their full potential. This is in the interests of South Africa as much as it is in the interests of Anglo American, Anglo Platinum and De Beers.”   

He says today’s announcements flowed from a portfolio review started at the beginning of the year. He admits that Anglo Platinum and De Beers’ focus areas —platinum and diamonds—are at the bottom of their price cycles.

Listen to a recording of the media conference call with Anglo American CEO Duncan Wanblad

Summary of the company’s announcement

Anglo American plc has unveiled an ambitious strategy to enhance shareholder value by streamlining its portfolio to focus on high-value segments like copper, premium iron ore, and crop nutrients. This move aims to solidify its position in the market and boost profitability through strategic asset reallocation and operational enhancements.

Strategic Refocus on Core Assets

In a significant shift, Anglo American plans to concentrate on a select group of world-class assets, emphasizing sectors that support global decarbonization efforts and food security. The strategy includes three primary elements: copper, premium iron ore, and crop nutrients, each chosen for their long-term value and growth potential.

Copper

Anglo American is set to capitalize on its holdings in three of South America’s top ten copper mines. With a clear pathway to exceed 1 million tonnes per annum in copper production, the company is positioning itself to meet growing global demands for decades, thanks to these assets’ competitive production capabilities and extensive resource endowments.

Premium Iron Ore

The strategy underscores a commitment to 100% premium iron ore production, particularly types that aid in steel decarbonization. With significant operations in Brazil and South Africa, the company is well-positioned to leverage these assets for enhanced market share and profitability.

Crop Nutrients

Despite a temporary slowdown in development to improve the balance sheet, the long-term strategy for crop nutrients remains robust. By focusing on completing essential technical studies by 2025, Anglo American aims to preserve the high-quality, multi-generational potential of its assets in this sector.

Simplification for Enhanced Returns

The overhaul extends beyond portfolio realignment. Anglo American is significantly reducing its capital expenditures, with plans to lower spending by $1.6 billion over the next three years. The restructuring includes divesting its steelmaking coal and exploring strategic options for its nickel assets and De Beers diamond operations. Additionally, Anglo American Platinum will be spun off in a move designed to optimize shareholder value.

Financial and Operational Enhancements

The streamlined portfolio is expected to improve financial metrics substantially, with EBITDA margins predicted to rise from 31% to 46% by leveraging operational efficiencies and cost reductions. The company targets a $1.7 billion reduction in portfolio costs, including $0.8 billion in annual recurring savings by the end of 2025. This fiscal prudence is balanced with a commitment to maintain a 40% dividend payout and achieve a net debt to EBITDA ratio below 1.5x, even at the bottom of the economic cycle.

Growth and Sustainability at the Forefront

Anglo American’s refined focus also emphasizes sustainable growth. The company has outlined a robust path to expand its operations, particularly in copper and iron ore, areas critical to supporting the energy transition and global economic development. This strategy is supported by Anglo American’s proven project delivery capabilities and its longstanding reputation as a responsible operator in key mining regions like South America and Southern Africa.

Employee and Community Impact

Recognizing the potential impacts of such comprehensive changes, CEO Duncan Wanblad highlighted the opportunities these changes bring to employees and host communities. The company plans to implement these transitions respectfully, ensuring support for employees and continued contributions to local development, especially in South Africa.

Conclusion

Anglo American’s strategic refocus marks a pivotal shift towards a more concentrated portfolio designed to enhance shareholder value and capitalize on global trends like decarbonization and food security. By streamlining operations, optimizing asset allocation, and focusing on high-growth sectors, Anglo American is positioning itself for sustainable success in the evolving global marketplace. This bold strategy reflects the company’s commitment to operational excellence and responsible mining practices, aiming to deliver long-term benefits.


Anglo American eyes break-up as it fends off BHP offer

SOURCE: REUTERS

By Clara Denina and Felix Njini

LONDON, May 14 (Reuters) – Anglo American laid out plans on Tuesday to refocus on energy transition metal copper while spinning out or selling its less profitable coal, nickel, diamond and platinum businesses, as it moves to fend off BHP Group’s $43 billion takeover offer.

The announcement comes a day after the London-listed miner rejected its Australian suitor for the second time in less than three weeks, saying an increased offer from BHP continued to significantly undervalue the company.

Anglo said on Tuesday it would divest its steelmaking coal assets, demerge its South African platinum unit, explore options for its nickel mines and divest or demerge diamonds business De Beers. The group expects the new portfolio configuration will lower costs by $1.7 billion.

“We expect that a radically simpler business will deliver sustainable incremental value creation through a step change in operational performance and cost reduction,” Anglo CEO Duncan Wanblad said.

Anglo shares were down 3.3% at 26.17 pounds by 1224 GMT. BHP, the world’s biggest listed miner, had no immediate comment on Anglo’s plan.

BHP’s 27.53 pound per share offer, raised from an initial 25.08 pounds, would require Anglo to sell its iron ore and platinum assets in South Africa, where it employs more than 40,000 people.

That has caused alarm in South Africa, where unemployment and a stagnant economy are major issues in campaigning for a May 29 election.

Wanblad said on Tuesday BHP’s bid had forced him to accelerate plans for a spin-off of Johannesburg-listed Anglo American Platinum, known as Amplats.

Under Tuesday’s plan, Anglo will keep its South African Kumba Iron Ore business, while Wanblad said the planned divestment of Amplats would be “completely different” in terms of time and complexity to the BHP proposal.

South Africa’s mines minister Gwede Mantashe said on Tuesday he had no problem with what Anglo was proposing, and that he hoped it would continue to resist BHP’s bid.

Anglo also said on Tuesday it will slow the development of its Woodsmith fertiliser project in northeast England and seek strategic partners.

It now plans to spend $200 million on the project in 2025, down from a previously estimated $1 billion, and nothing in 2026. First production at Woodsmith will be pushed back from 2027, Wanblad said.

The divestment of Anglo’s steelmaking coal operations could move rapidly, he added, given the interest that is available.

SELF-HELP

Anglo has been meeting investors since BHP’s initial approach in April, and after a review of its assets initiated in February in response to a 94% plunge in annual profit and writedowns at its diamond and nickel operations.

One top 20 investor at Anglo, who said a deal with BHP was likely to lead to less copper being produced, rather than the increase needed to accelerate the world’s energy transition, welcomed Tuesday’s proposal.

“At the moment, Anglo has lots of very interesting assets … but it is not a focused business focused on a clear strategic goal,” the shareholder said. “This plan offers clarity of purpose.”

MKP Advisers said however that the concern with the “self-help plan” will be that it is “too little, too late”.

“There is no timescale attached to most of the plans and it has been clear to most that many of the potential disposals across the portfolio are simply tough to execute,” MKP said.

Activist fund Elliott, one of Anglo’s top 10 shareholders after building up a $1 billion stake, declined to comment on the plan. It is expected to put out a statement later in the day, sources say.

Developments such as artificial intelligence and automation and the energy transition, which includes electric vehicles and renewable energy, have driven up demand prospects for copper cable used to conduct electricity.

Copper prices have risen 25% from this year’s Feb. 9 low to $8,127 a tonne.

Ashwin Pillay, senior associate at law firm Charles Russell Speechlys, said the new plan did address shareholder concerns that the value of Anglo’s copper mines has been suppressed by less valuable operations such as the diamond division.

“Intriguingly, there is still an opportunity for BHP to raise their offer further, including by adding a cash component, which would sweeten the pot,” he added. ($1 = 0.7966 pounds)

(Additional reporting by Melanie Burton in Melbourne, Sinead Cruise in London and Eva Mathews; Writing by Jan Harvey; Editing by Nivedita Bhattacharjee, Kirsten Donovan, Sonali Paul and Catherine Evans)


Anglo CEO says BHP bid forced his hand on demerger of South African assets

SOURCE: REUTERS

By Felix Njini

JOHANNESBURG, May 14 (Reuters) – The boss of Anglo American said on Tuesday a bid by rival BHP to take over the company forced him to accelerate plans for a spin-off of its South African platinum assets, which come on the cusp of a national election.

While Anglo was already working on its own review of assets including the platinum and diamonds businesses, the timeline had to be speeded up after BHP’s approach, Anglo CEO Duncan Wanblad said.

As a pre-condition for its bid, rejected twice by Anglo, BHP had requested that Anglo exit its platinum and iron ore units in South Africa, drastically reducing its presence in the country.

After arguing that the BHP proposal undervalued Anglo, the London-listed mining giant laid out a strategy on Tuesday that includes a potential break-up of the group by demerging or selling its steelmaking coal, nickel, diamonds and platinum businesses.

That includes a demerger of its Johannesburg-listed Anglo American Platinum unit, known as Amplats. The plan sent Amplats’s shares down as much as 10%.

“The only thing that the BHP approach did is that it forced the timeline on work that we were already doing,” Wanblad said on a conference call after Tuesday’s announcement.

“This is an acceleration of a strategy process that we were already executing. I have to say that I would probably not have announced it at this particular point of time,” he added, referring to the looming election in South Africa on May 29.

South Africa Mines Minister Gwede Mantashe told Reuters he had no issues with the proposed demerger of Amplats, even if the ultimate fate of the business remains unclear.

“It is… important for Anglo to restructure itself to get optimal performance of every portfolio in their stable,” Mantashe said. “And I hope it will work for them.”

Mantashe, who had opposed BHP’s bid, said he hoped Anglo would continue resisting the offer from its rival, which was raised to $43 billion on May 7.

Shares in Anglo unit Kumba Iron Ore, which under the review laid out on Tuesday would remain within the group, rose 2.3%, reversing earlier losses.

As the election looms, weak economic growth and high unemployment are among the key issues on voters’ minds.

The planned break-up of Anglo, which had already announced thousands of job cuts in South Africa due to lower metals prices, raises the prospect of more job losses. The main union federation COSATU said it would seek reassurances.

Wanblad said the group, which has a 79% stake in Amplats, remained committed to South Africa. “I can’t belabour the point more that this is not actually leaving South Africa in any way, shape or form,” he said.

Founded by gold and diamond baron Ernest Oppenheimer at the peak of the World War One in 1917, Anglo American has been synonymous with South African mining for decades.

It employs roughly 45,000 people in South Africa, though Amplats has announced plans to cut 3,700 jobs while Kumba plans 490 job cuts.

(Reporting by Felix Njini; Writing by Silvia Aloisi; Editing by Jan Harvey)

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