[Anglo-American] Mining’s Octopus Regenerates – by David Fickling (Bloomberg News – February 16, 2017)


In its heyday, the business empire founded by Ernest Oppenheimer was likened to an octopus.The tangle of arms stretching from Anglo American Plc has at times embraced the world’s biggest miners of gold, platinum and diamonds; concrete plants; pulp and paper mills; banks; newspapers; car factories; a South African vineyard; and a stake in the brewer that eventually became SABMiller Plc.

Chief Executive Officer Mark Cutifani dramatically turned his back on that legacy last February. The still-sprawling business would get rid of 60 percent of its workforce and two-thirds of its mines and focus on a core of diamonds, platinum and copper, he told investors.

Operations in coal, iron ore, nickel, manganese, niobium and phosphates that collectively accounted for about 99.5 percent of the tonnage produced by the company would be put up for sale.The plan was wildly popular with investors, making Anglo American one of the five best-performing stocks in the Bloomberg World Mining Index during 2016 — but it’s now being mothballed.

With commodity prices roaring back, the company will keep hold of coal mines in Australia and Colombia and Brazilian nickel and iron ore pits, people familiar with the matter told Kevin Crowley, Thomas Biesheuvel and Dinesh Nair of Bloomberg News. It’s still considering a spinoff of some South African coal and iron ore assets, the people said.

It’s not hard to see why the plan is being junked. Twelve months ago, Anglo American was in desperate straits. With net debt equal to almost four times its market capitalization and yields on its 4.875 percent 2025 bonds spiking to 13.5 percent, the company needed to prepare a fire sale to convince investors it could survive a drawn-out commodity crash. With that prospect averted, Cutifani can afford to shut up shop.

For the rest of this article, click here: https://www.bloomberg.com/gadfly/articles/2017-02-16/anglo-american-s-octopus-lives-to-fight-another-day