Company announces plans to exit Kumba in move away from iron ore. Anglo American announced on Tuesday long-awaited plans to restructure its portfolio and address its debt.
The mining group is looking to exit its controlling stake in Kumba Iron Ore, Africa’s largest producer of the steelmaking ingredient, after it said it will build its future around copper, platinum and diamonds.
“We’re looking at either a selldown in our position in Kumba as well as a potential demerger,” Rene Medori, the chief financial officer of London-based Anglo, which owns a 69.7% stake in Kumba, said on a conference call Tuesday. Anglo “will not expect to complete the transaction until sometime in 2017,” Medori said.
The decision to exit the holding comes as the iron-ore producer saw its margins squeezed by a 67% slump in prices since the start of 2012 after some of the biggest operators including BHP Billiton and Rio Tinto fed a supply glut. Kumba’s profit margin declined from 27% to 11% over the same period, prompting the cmopany to cut jobs and axe its dividend.
Kumba will work with Anglo to evaluate options for the exit, it said in a separate statement. Its shares rose for a fifth day, adding 3.8% to R56.06 at 10:47 am in Johannesburg and climbing 36% since the beginning of the year.
“Anglo is under a lot of pressure to liquidate assets and this might be easier to get rid of,” Stephen Meintjes, head of research at Momentum S.P. Reid Securities in Johannesburg, said by phone.
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