Anglo American to retain coal and nickel assets in change of tack

A year after unveiling plans for a radical streamlining of its portfolio, Anglo American has changed tack and will now retain some of the assets previously deemed non core.

With debts reduced because of an unexpected surge in commodity prices Anglo said on Tuesday that it could now hold on to coal operations in Australia and nickel assets. It might also retain its thermal coal and iron ore assets in South Africa in spite of political and regulatory uncertainty

Anglo chief executive Mark Cutifani, chief executive said there was now less pressure to sell assets from a debt reduction perspective.

We will continue to upgrade our portfolio as a matter of course, although asset disposals for the purposes of deleveraging are no longer required,” he said.

Mr Cutifani was speaking after Anglo, which marks the 100th anniversary of its founding in South Africa later this this year, reported a 70 per cent surge in underlying earnings for 2016.

The shift in strategy announced by Anglo on Tuesday highlights the improvement in bulk commodity prices over the past year that helped companies across the sector generate large amounts of cash to pay down debt.

Coking coal briefly surged to more than $300 a tonne in November due to policy changes in China, while steelmaking ingredient doubled and remains above $90 a tonne.

But it is also likely to raise questions about the company’s direction. Analysts say the plan laid out a year ago to base Anglo around three key commodities was premised as much on strategic as debt reduction grounds.

“Our priority for 2017 is to deliver further productivity improvements while maintaining capital and cost discipline in order to be in a position to resume dividend payments for the end of 2017, and to restore an investment grade credit rating,” said Mr Cutifani.

In the year to December, Anglo recorded pretax profit of $2.6bn, against a record loss of $5.5bn a year earlier. Underlying earnings before interest and tax rose 70 per cent to $3.7bn, in line analyst expectations.

Net debt was $8.5bn, down from $12.9bn in 2015, and significantly below Anglo’s self imposed $10bn target.

As expected, Anglo did not declare a dividend. It suspended payments in 2015.