Anglo’s bounce-back plan after failed BHP bid is gaining momentum

Once done with its restructuring, it will be predominantly a copper producer.

Anglo American successfully fought off a takeover bid by BHP earlier this year and is now doing what BHP and others argued Anglo should have done years ago – divest itself of businesses that leak value and focus on sectors that promise the best growth.

Last month Anglo sold 5% of its shares in subsidiary Anglo Platinum, raising R7.2 billion in the process, as part of a restructuring that will leave it with a slimmed-down portfolio 60% focused on copper – with premium iron ore, of which Kumba is a part, and crop nutrients through its investment in Woodsmith accounting for the other two pillars of the business.

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It owns three of the 10 largest copper producers in South America and expects to achieve one million tons of output per year by 2030.

That does not remove the target on Anglo’s back, though the cost will certainly rise as it seeks to remove the persistent discount to net asset value that triggered the aborted BHP bid earlier this year.

Anglo convinced its largest shareholders it could do a better job than BHP in unlocking value, and now appears to be delivering on that promise.

The first step in the restructuring is reducing its exposure to Anglo Platinum (Amplats), and it has also announced plans to offload its stake in diamond business De Beers, in which it has an 85% stake.

‘Step change’

Speaking at the Joburg mining indaba on Thursday, CEO Duncan Wanblad said the simplified portfolio being created will deliver a step change in operational performance and cost reduction as the key to unlocking value.

“This is true not only within a simplified Anglo American, but also for Amplat and De Beers which will be pure-play businesses with market leading positions.

“Delivering portfolio simplification at pace and for value is critical to ensure that each asset, whether those that will remain in the portfolio or will be separated, is set up for success.”

Amplats’s share price has been hammered by lower platinum group metal (PGM) prices, though Wanblad believes the company is experiencing a cyclical downturn from which it will recover, given over-hyped prospects for electric vehicles.

“Battery electric vehicles are not the nirvana that some would have you believe, and hybrid vehicles are expected to become the more realistic option in many markets, remembering that hybrid cars generally have higher PGM loadings than internal combustion engine vehicles,” said Wanblad.

Amplats is expected to perform better as a standalone business, with Anglo American shareholders being allowed to invest directly in PGMs rather than through the parent company.

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De Beers is likewise in the throes of a cyclical downturn, though Wanblad expects it to unleash value for shareholders by being similarly spun off from the mother ship.

Anglo says it remains committed to SA, which will account for a third of its profits post-restructuring.

Divesting itself of non-core businesses is nothing new to Anglo, having previously spun off assets that ended up in separate mining companies such as Exxaro, and coal producers Thungela and Seriti.

Growth

Another element in the restructuring programme is laying a path of growth. Apart from its abundant copper assets in South America, it has its eyes set on expanding its copper footprint in southern Africa “at the right time and with the right partners”, said Wanblad.

Kumba will remain part of the Anglo stable, focusing on high value products that are likely to become more desired by steelmakers under pressure to decarbonise.

It recently announced a R7.6 billion investment in Kumba’s ultra-high density media separation processing technology project at Sishen in the Northern Cape.

Wanblad said Anglo had already embarked on a restructuring programme before the BHP bid, and the plans implemented since then were not inspired by the Australian miner’s aborted bid for control.

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