When a company quadruples in value over nine months, it’s unusual for the biggest investors to say management has the wrong strategy. But that’s exactly what’s happening with Anglo American Plc, the mining company that is the U.K.’s best-performing blue-chip stock this year.
In February, Anglo was reeling from a broad slump in commodities that sent its shares to an all-time low and compounded a mountain of debt. To stanch the bleeding, the company proposed selling more than half its assets, including coal and iron-ore mines that had plunged in value. Almost as soon as the plan was announced, prices began recovering, so much so that investors including top shareholder Public Investment Corp. urged executives to reconsider.
“The desperation levels are not there anymore,” said Hanre Rossouw, a Cape Town-based fund manager at Investec Asset Management, whose investments include Anglo shares. “The strategy was predicated by balance sheet distress and the way to solve it was to sell assets. That became the strategy. That’s the wrong way to go about a strategy.”
For now, the company remains committed to selling assets even as the business benefits from the jump in prices. In July, Chief Executive Officer Mark Cutifani said that while Anglo was surprised by the rally, it still expects longer-term pressures from too much supply.
He isn’t alone. Last week, rival producer BHP Billiton Ltd. said that despite the gains, iron-ore and coal will remain in surplus for the short term. “We will continue with the program we currently have,” Norman Mbazima, who is in charge of Anglo’s asset sales in South Africa, said in an interview on Oct 5.
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