Anglo to sell platinum, coal assets
Mining giant Anglo American is making plans to exit some of its South African assets in coal and platinum - sectors threatened by additional state interference and hostile labour environments.
Changes in the Minerals and Petroleum Development Act, to declare certain commodities "strategic", have been sent back to the cabinet because certain clauses were seen as unconstitutional.
The South African government has made it known that it wants to declare coal a strategic resource. That would place a limit on how much coal would go to power utility Eskom and how much companies could export.
There is also a drive to get at least half the coal sold to Eskom placed in the hands of black business.
The planned sale of Anglo's Kriel, New Denmark and New Vaal mines, which produced about 40% of Eskom's supply last year, would provide an opportunity for new black miners to enter the industry.
CEO Mark Cutifani said the company was also talking to unions in Rustenburg to facilitate the sale of platinum assets - seen as strategic by the government because South Africa sits on about 75% of the world's platinum.
The country's platinum sector recently endured a five-month strike and Rustenburg, where the Marikana massacre took place, is known for violent inter-union rivalry.
In its platinum portfolio, Anglo wants to sell its Union mines and two joint ventures in the area. It will also sell its thermal coal assets in Australia and copper and nickel in South America - placing $10-billion to $12-billion in the kitty. The restructuring drive could help Anglo to a much stronger position in a year or two. The business, like most mining companies, has been hard-hit by low commodity prices.
Anglo released its results on Friday, which showed a deepening loss from $961-million to $2.5-billion last year. But despite various writedowns, the group's results contained some positives for analysts.
Farai Mapfinya, head of equities at JM Busha Asset Managers, said Cutifani had announced a comprehensive portfolio restructuring exercise in 2013 and the diversified miner was still largely on track.
Despite a 161% rise in losses, Mapfinya felt the numbers were "quite strong". "If you look at the operational performance and the portoflio restructuring targets, Cutifani is on track for what he said he'd do, although Anglo is perhaps slightly behind on the platinum side."
The iron-ore price had hit the miner hard, but Mapfinya said the price slide from $130, although inevitable, had probably been exaggerated. "There could be some bounce in the iron ore-price soon."
He said Anglo was one of JM Busha's top picks for the last year and it "continues to buy at these levels. We see some up side."
In a similar vein, Imara SP Reid's head of research, Stephen Meintjies, said Cutifani hasn't been getting the credit due to him. "The plans are progressing in line with Cutifani's guidance. He has reiterated there's lots more to do, but it's fair to say he's accomplished a lot on the operational side, and Anglo is successfully cutting costs," said Meintjies. Another analyst, who did not want to be named, said that on the whole, despite the bracketed figures in the results, Anglo appeared to be "running along nicely".
In terms of Cutifani's plans to divest from certain parts of the business, the analyst said Anglo was in no hurry, so it was taking a strategic, sensible approach without overpromising on delivery.
"Anglo doesn't need the cash desperately, so it's more about aligning the portfolio correctly rather than trying to reduce the debt level. It can probably be seen as neutral - proceeding but slow, focusing on the right assets."