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Anglo American just won't sell the mines its rivals want

Apr 05 2016 13:55
Agnieszka de Sousa and Thomas Biesheuvel

Santiago - For Anglo American [JSE:AGL], life would have to get a whole lot worse before it considers selling its best copper mines.

“We don’t need to sell them. Anglo is not in that position,” Hennie Faul, Anglo’s copper chief, said in an interview in Santiago, Chile on Monday. The entire industry would be in turmoil for Anglo to have to sell its prime assets, he said.

The century-old company is trying to engineer a turnaround by selling more than half its other mines and exiting the iron-ore and coal business to focus on its best assets - producers of diamonds, platinum and copper. Anglo wants to raise $4bn from selling mines and reduce net debt to less than $10bn this year.

The price of copper has rebounded 10% from a six-year low of $4 318 a metric ton in January, sparking a turnaround in Anglo’s shares, which have jumped 73% this year in London. That’s helped relieve some of the urgency of enacting Anglo’s rescue plan unveiled in February by Chief Executive Officer Mark Cutifani.

While the company is selling everything from coal in Australia to niobium in Brazil, there has been speculation that it’s best two copper mines, Collahuasi and Los Bronces, are the sort of projects larger rivals such as BHP Billiton [JSE:BIL] and Rio Tinto Group would be interested in buying. Both have said they would like to add high quality copper mines.

Market speculation

“There’s been speculation in the market, but I certainly didn’t have people falling on my doorstep to come in with testing offers,” said Faul.

While Anglo is keen to keep its flagship copper projects, the sales process for its lower-quality mines continues. The London-based company, which plans to eventually reduce employee numbers to 50 000 from 135 000, sold its Norte copper unit in Chile last year and is also looking to offload its El Soldado copper mine in the country.

“It’s still seen as non-core but we haven’t actually started the official sale process for it,” said Faul. “The market is probably not at the right time now to start that."

In the longer term, Faul said Anglo wants to expand both Collahuasi and Los Bronces but given the current market and the company’s stretched finances now is not the time.

“Both those mines have got further potential in years to come when prices are right and the market is right to expand,” Faul said. “Anglo is not in a position now to embark on a major capital expansion. I would think it would be reckless to do that.”

anglo american  |  bhp billiton  |  rio tinto  |  copper  |  mining
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