Anglo American has lined up a $4.9 billion (R88.4bn) windfall from the disposal of its steelmaking coal operations, with the company reaching an agreement to spin off the Australian assets to United States-listed Peabody Energy for $3.78bn at a time BHP still has legroom to make an offer for the London and Johannesburg traded resource group.
As per London listing rules, BHP has to make an offer for Anglo American by the end of this month. This follows the rejection of its offer by Anglo American, which then sought to fast track its own restructuring process, earlier this year.
Anglo American’s restructuring includes the disposal of assets such as platinum group metals (PGM) operations, diamond mining, and its steelmaking coal operations for which the company has now made headway.
After recently announcing the disposal of Queensland, Australia-based coal miner Jellinbah for approximately $1.1bn, Anglo American yesterday said it had reached agreements for Peabody Energy to take over its steelmaking coal mines in Australia.
“The sale of our steelmaking coal business is another important step towards delivering the strategy that we set out in May to create a world class copper, premium iron ore and crop nutrients business,” said Anglo American CEO, Duncan Wanbald.
However, market and resource analyst, Arda Arkun, said the transaction was negative for Peabody.
”I don’t like Peabody’s acquisition of Anglo American assets. It significantly increases risks in a down-cycle and considerably increases rewards in an up-cycle. I do not like this much leverage in a coal business,” said Arkun.
Jim Grech, the Peabody Energy CEO, however, commented that the acquisition had delivered “world-class (coal) assets from Anglo American” to the company.
“We look forward to integrating these assets, teaming up with their highly skilled workforce, and aligning with our new mine joint venture partners to create long-term value,” said Grech.
The transaction is subject to a number of conditions, including customary competition and regulatory clearances, and pre-emption arrangements.
It is comprised of an upfront cash consideration of $2.05bn, a deferred cash consideration of $725 million, the potential for up to $550m in a price-linked earnout and contingent cash consideration of $450m linked to the reopening of the Grosvenor mine.
The upfront cash consideration is also subject to normal completion adjustments and completion is expected by the third quarter of 2025. shares in Anglo American surged 2.1% to R545.83 in afternoon trade on the JSE yesterday before closing at R541.29 per share at 5pm.
Bruce Williamson, mining analyst at Integral Asset Management, told Business Report that the disposal of the Australian steelmaking coal operations of Anglo American was “broadly in line” with the company’s focus on iron ore, copper, and crop nutrients.
“[It is] not surprising that they have sold to Peabody. Anglo American would also have wanted to make sure that the buyer (Peabody) is well-known and competent and will do justice to the assets and staff,” he said.
Williamson added that the transaction would have boosted Anglo American’s cash position and helped lower its net debt position.
After announcing the disposal of the steelmaking coal operations, Wanbald said Anglo American expects to complete the demerger of Anglo American Platinum, which is expected by mid-2025.
Wanbald said the group has also “seen strong interest” for its nickel business, with “the sale process well progressed” now.
Through all this restructuring, Wanbald said Anglo American had also made progress to deliver $1bn in cost savings. It had also made plans for an additional $800m in pre-tax recurring cost benefits on a run-rate basis from the end of 2025.
On completion of the restructuring, Anglo American believes that it will be able to “offer a highly differentiated investment proposition supported by strong cash generation and the capabilities and long-standing relationship networks that can deliver” full potential.
“We are absolutely focused on delivering that strategy and unlocking the associated value as we streamline our cost structures and create a much simpler, more resilient and more agile business that will enable full market value recognition,” said Wanbald.
BUSINESS REPORT