Anglo not gone from South Africa

It's the end of an era for 107-year-old mining giant Anglo American as it on Tuesday announced plans to demerge De Beers, the world's biggest diamond producer by volume, and platinum producer Anglo American Platinum as part of a portfolio restructure to improve shareholder value.

Anglo unveiled a major shake-up of its portfolio that will see it focus on its South American copper assets, premium iron ore including Kumba Iron Ore and its fertiliser business Woodsmith after a review of its assets in 2023.

The company said the strategic shift is in the best interests of shareholders as it aims to simplify the portfolio and reduce costs. In addition to disinvesting in Amplats and De Beers, Anglo will also sell its steelmaking coal assets and explore selling or placing its nickel operations in care and maintenance.

After the restructuring the group expects a better financial performance, with $1.7bn (R31.26bn) lower costs expected on the new portfolio including an additional $800m (R14.71bn) of cost out from the end of 2025. Earnings before interest, taxes, depreciation and amortisation are expected to improve to 46% from 31%. The process is set for completion by the end of 2025. 

Speaking to media during a press conference after the announcement, Anglo CEO Duncan Wanblad said Anglo will remain in South Africa.

“Anglo American is not gone from South Africa and will not be gone. What we are creating is something that is potentially stronger for South Africa in the context of two companies in the form of Anglo Platinum and De Beers that have more resilience and more capability to grow in their market than they might otherwise be within the portfolio of Anglo American,” he said.

Wanblad said Anglo American remains the same in its value and the role it plays in South Africa.

The shake-up comes as Anglo rejected BHP's revised proposed takeover of the company, saying it undervalues the group.

The group's restructuring is not in response to the BHP takeover bid, said Wanblad. “The only thing the BHP approach did is it forced the timeline on work we were already doing. It is an acceleration of a strategic process we were already executing.”

The timing of the BHP offer could have been better given the upcoming elections in South Africa, he said.

“I would probably not have announced it at this particular time, it would have been a little later. The reason I would have announced it a little later, I think it is disrespectful to the South African government in the middle of elections, a week before elections, to contemplate something like this. I would have been much more sensitive in stakeholder management of this.”

On Monday Anglo said aside from significantly undervaluing the group, BHP's latest proposal continues to contemplate a structure which is “highly unattractive” for shareholders, given the uncertainty and complexity inherent and significant execution risks.

The BHP bid is on condition that Anglo disinvests in Kumba Iron Ore and Anglo American Platinum.

Anglo said the requirement to pursue two contemporaneous demergers created significant uncertainty which would fall disproportionately to Anglo American shareholders.

“The Anglo American Platinum and Kumba Iron Ore shareholdings, at market value, are worth about $15bn (R276bn) and 34% of the proposed total consideration. This is a substantial amount of stock to distribute and reflects a majority of the shares of both Anglo American Platinum and Kumba Iron Ore. This creates significant uncertainty as to the delivered value as part of the proposal.”

Business Times