Despite Challenging Conditions, Investors Buying Anglo American's Self-Improvement Potential
- Weak iron ore prices and weak margins in platinum and diamonds are pressuring this large South Africa-focused miner.
- Management is looking to a multiyear restructuring project to cut costs and boost returns.
- Shares appear slightly undervalued on a below-peer multiple, but reducing costs and enhancing cash flow is paramount.
Anglo American Is Cheap As Chips, But Will Get Cheaper
Thu, Jan. 22, 3:23 PM
- Anglo American (OTCPK:AAUKF, OTCPK:AAUKY) is considering the sale of several coal assets in eastern Australia as the miner struggles to boost returns during a slump in commodity prices, FT reports.
- Anglo hopes to sell five mines in Queensland and New South Wales as part of a $3B-$4B asset disposal program ordered by CEO Mark Cutifani to help bolster its balance sheet.
- The miner also is selling platinum mines in South Africa and copper assets in Chile as part of its worldwide disposal program.
Wed, Jan. 14, 7:57 AM
- Mining stocks look headed for sizable losses, as copper prices sink to five-and-a-half year lows and the World Bank lowers its forecast for global economic growth.
- Glencore (OTCPK:GLCNF, OTCPK:GLNCY) -11.5% in London trading, Antofagasta (OTC:ANFGF) -7% in London, Anglo American (OTCPK:AAUKF, OTCPK:AAUKY) -9.5% in London, Vedanta (OTCPK:VDNRF) -18% in London, Rio Tinto (NYSE:RIO) -4.3% premarket in the U.S., VALE -2.9%, FCX -5.1%, CLF -2.6%.
- BHP Billiton (NYSE:BHP) -7.5% in London and -5.5% U.S. premarket after S&P Capital IQ downgraded shares to Hold from Buy, expecting "weaker commodity prices to increasingly impact on group profits as hedges expire and see currency headwinds from a stronger [U.S. dollar]."
- ETFs: XLB, XME, SLX, COPX, VAW, UYM, CU, IYM, HAP, IRV, MXI, SMN, GNR, GUNR, PICK, MATL, FXZ, PYZ, CRBQ, RTM, CCXE, FMAT, GRES, SBM
Dec. 9, 2014, 7:58 AM
- Anglo American (OTCPK:AAUKF, OTCPK:AAUKY) says it is likely to miss its medium-term profitability targets, another sign of the havoc falling commodity prices are wreaking in the mining sector.
- In an investors day presentation, Anglo says it expects its return on capital employed to reach 12% in 2016 after last year setting 15% as its target, and says it is seeking ways to boost its EBIT by $2B so it can achieve the target.
- Anglo also reduces its expected capital spending by $500M-$800M to $6B-$6.2B for this year and by $800M-$1B to $5.2B-$5.5Bfor 2015, and raises its 2014 production guidance for iron ore, metallurgical coal, thermal coal, copper and nickel.
Nov. 7, 2014, 3:57 PM
- Firms are showing interest in Anglo American's (OTCPK:AAUKF, OTCPK:AAUKY) three Chilean copper mines, but a lack of public information is holding up some potential buyers, WSJ reports.
- Anglo reportedly hopes to raise at least $1B from the sale of the Mantos Blancos and Mantoverde mines, along with its share of the El Soldado mine and the Chagres smelter.
- One of the biggest mining companies in Chile, Anglo plans to concentrate on its larger copper operations at Los Bronces mine and Collahuasi.
Oct. 27, 2014, 8:10 AM
- Anglo American (OTCPK:AAUKF, OTCPK:AAUKY) says it has delivered its first iron ore on the ship from its Minas Rio iron ore project in Brazil.
- Anglo says the project was finished within its revised targeted budget and time schedule after placing more than 80K metric tons of iron ore on a chartered vessel for delivery to China.
- Anglo bought Minas Rio in 2008 for $5.5B, and it cost $8.8B to build vs. an initial estimate of $2.5B; the miner is now focused on ramping up the operation over the next 18-20 months to its full capacity of 26.5M tons/year of iron ore.
Oct. 23, 2014, 9:59 AM
- Anglo American (OTCPK:AAUKF, OTCPK:AAUKY) reports a 37% Y/Y increase in Q3 iron ore production to 13M metric tons, joining larger rivals such as Vale in increasing output to grab market share even as prices fall.
- CEO Mark Cutifani says Anglo will press on with its much-delayed Minas Rio iron ore project in Brazil, which is expected to deliver its first ore later this year.
- Raises its forecast for full-year output at its Kumba Iron Ore subsidiary to 45M-46M metric tons from 44-46M.
- Copper output fell 15% Y/Y due to a decline in the grades of ore at two of the company's main Chilean mines, thermal coal production fell 4% because of bad weather in Colombia, and platinum production dropped 14% as Anglo continues to shake off the effects of a five months-long strike earlier this year.
Oct. 22, 2014, 10:43 AM
- BHP Billiton (BHP -1.1%) is the latest company to report record output of metallurgical coal, as extra supply far outpaces demand in countries such as China and Japan, which produce much of the world’s steel.
- BHP says it produced a record 12.8M metric tons of met coal in Q3 - including output from the major new Caval Ridge mine in Australia - up 7% Q/Q and 25% Y/Y, and Anglo American’s (OTCPK:AAUKF, OTCPK:AAUKY) H1 2014 met coal production jumped 21% Y/Y.
- The willingness to dig up more coal (NYSEARCA:KOL) despite lower prices mirrors a similar push in iron ore, where global miners miners are investing and producing more in a bet that their efficiencies of scale will allow them to profit, but critics say the strategy risks creating supply gluts that will take years to clear.
- The price for Australian premium hard coking coal has dropped 16% this year to $110/ton, near the lowest level in more than seven years and well below the $300/ton fetched in early 2011.
Oct. 8, 2014, 10:30 AM
- With any hope of Glencore (OTCPK:GLCNF, OTCPK:GLNCY) buying Rio Tinto (NYSE:RIO) on hold for six months, Glencore could turn to other targets such as Fortescue Metals (OTCPK:FSUMF) or Rio could pursue a defensive deal with a company such as Anglo American (OTCPK:AAUKF, OTCPK:AAUKY), Sanford Bernstein analyst Paul Gait speculates.
- In the past, “we have had that kind of one action precipitate a whole cascade of events that puts a number of other guys in play," Gait tells Bloomberg.
- On the other hand, Glencore's pursuit of Rio may not be over, Gait says, adding "the industrial logic and the strategic logic are compelling to the point of being overwhelming."
Oct. 7, 2014, 12:33 PM
- Anglo American (OTCPK:AAUKF, OTCPK:AAUKY) is planning to start the sale of its three Chilean copper mines and a smelter valued at $1B by the end of the year, Bloomberg reports.
- The Mantos Blancos and Mantoverde mines, along with Anglo’s 50.1% stakes in El Soldado mine and the Chagres smelter in Chile reportedly will be sold.
- CEO Mark Cutifani has described plans to increase the company’s return on capital to at least 15% by 2016 and to consider disposing of businesses that pull down the average.
Oct. 3, 2014, 4:13 AM
- Gold miners have the greatest exposure to the Ebola outbreak, Deutsche Bank says. Iron ore and aluminum miners, and oil drillers also have some exposure.
- Randgold's (NASDAQ:GOLD) exposure is most acute, with 100% of its NPV in the affected region.
- AngloGold (NYSE:AU) has 53% NPV exposure.
- ArcelorMittal (NYSE:MT) has some exposure through its iron-ore mine in Liberia (6.5% of its output).
- BHP Billiton (NYSE:BHP) and Anglo American (OTCPK:AAUKF, OTCPK:AAUKY) aren't exposed to the region.
- Related: Exxon delaying some west Africa drilling work because of Ebola (Oct. 2)
- Related: ArcelorMittal contractor moving workers out of Liberia (Aug. 8)
Sep. 11, 2014, 8:55 AM
- Southern Copper (NYSE:SCCO) says it still hopes to buy a share in Anglo American's (OTCPK:AAUKF, OTCPK:AAUKY) $3.3B Quellaveco project in Peru, and that talks must now take place at the highest level.
- Negotiations on a potential sale of part of Anglo's ~82% stake in Quellaveco fell apart in the past year because each company wanted a controlling stake, but talks restarted two months ago and SCCO is now offering to hold an equal share if it can operate Quellaveco, SCCO CEO Oscar Gonzalez says.
- A lack of financing has held up Quellaveco, which is expected to produce 225K metric tons/year of copper.
Sep. 3, 2014, 12:55 PM
- Glencore (OTCPK:GLCNF, OTCPK:GLNCY) CEO Ivan Glasenberg rejects speculation about a possible takeover of Anglo American (OTCPK:AAUKF, OTCPK:AAUKY), saying the miner is interested only in assets it already trades.
- “With Anglo, we don’t trade diamonds... and we don’t trade platinum,” Glasenberg says.
- A Jefferies analyst wrote yesterday that a Glencore bid for Anglo is increasingly possible as the stock widens its outperformance over its smaller rival, and Anglo CEO Mark Cutifani told WSJ yesterday his company is open to takeover offers.
Sep. 2, 2014, 12:45 PM
- Anglo American (OTCPK:AAUKF, OTCPK:AAUKY) CEO Mark Cutifani says he might be open to a takeover offer if a compelling takeover offer arrives.
- "I'm very open. I'm not scared by it," Cutifani tells WSJ while saying his overriding ambition remains transforming Anglo into a top miner in its own right.
- The CEO says his key aim is to boost the miner's return on capital employed to at least 15% in 2016, after the measure slipped to 10% in H1 2014 from 11% a year earlier.
- Cutifani says he is worried about the outlook for the iron ore market, but says Anglo will still move forward with its delayed Minas-Rio iron ore project in Brazil, which is expected to deliver its first ore later this year.
Jul. 25, 2014, 8:59 AM
- Anglo American (OTCPK:AAUKF, OTCPK:AAUKY) says its H1 net profit more than tripled to $1.46B vs. $403M in the impairment-weighed H1 of last year, but underlying operating profit fell 10% to $2.93B due to lower prices across most of its commodities and a 40% drop in platinum output from the five-month-long strike at its South African platinum operations.
- CEO Mark Cutifani says Anglo expects to raise $3B-$4B from assets disposals over the next two years, while stressing the company is "not in a fire sale mode."
- H1 return on capital slipped to 10% from 11% a year earlier, but Cutifani says he is more confident about hitting the company's 15% target by 2016 than a year ago.
- Says the long-delayed Brazilian Minas Rio project remains on track to ship its first iron ore by the end of 2014.
Jul. 23, 2014, 4:36 PM
- BHP Billiton (NYSE:BHP) and Anglo American (OTCPK:AAUKF, OTCPK:AAUKY) are in talks to sell their jointly owned portfolio of manganese assets in South Africa and Australia, WSJ reports.
- The assets include two mines in South Africa, one in Australia, and processing plants in both countries; BHP owns 60% and Anglo 40% of the operations, which analysts have valued at ~$1.33B.
- Manganese is a key alloy ingredient in the production of stainless steel but it is only a niche business for the big miners; global trade in manganese totals ~$3B/year, 2.5% of the equivalent figure for iron ore.
Jul. 21, 2014, 4:36 AM
- Anglo American's (OTCPK:AAUKY) subsidiary, Amplats, is planning to sell its Union mine, Rustenburg operations and a joint venture in South Africa.
- The move will reduce the miner's staff count by 20k, and follows a continuous five-month strike against the company by the AMCU union.
- The mine is expected to be sold to Sibanye Gold (NYSE:SBGL), whose CEO Neal Froneman announced a wish for a platinum deal before the end of the year.
- ETFs: PPLT, PTM, PLTM, PGM
AAUKY vs. ETF Alternatives
Anglo American is engaged in the mining and natural resource sectors. Co. is a global leader in platinum group metals and diamonds, with significant interests in coal, base and ferrous metals, and an industrial minerals business.
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