Anglo American Plc (AAL) is getting approaches from potential buyers of mines it plans to exit, Chief Executive Officer Mark Cutifani said, as he wraps up a review of the group’s underperforming businesses.
“We are receiving expressions of interest, literally on a weekly basis, there’s a lot of interest in assets,” Cutifani said today in an interview with Bloomberg Television’s Guy Johnson. He declined to elaborate on how much the company seeks to raise from the sales. “We’ve got a range of figures that we’re working through.”
Cutifani, who began a review of operations from Australia to Brazil after joining London-based Anglo in April last year, plans to double the company’s return on capital to at least 15 percent by 2016. He will consider disposing of businesses that pull down the average.
The 56-year-old Australian isn’t concerned about Anglo becoming a takeover target once the reorganization is done, he said in a separate phone interview. Success in meeting the targets will increase Anglo’s value and demonstrate that management has done its job, he said.
“It doesn’t worry me in the least if we improve the company’s performance and people think that makes us an acquisition target,” Cutifani said. “But we are not about setting up ourselves for sale. We are about creating the best mining company in the world. Our job is to create a great business and do the right thing for the shareholders.”
Anglo advanced 3.4 percent to 1,639.5 pence at the close in London, the highest since May 14.
Anglo on July 21 put four platinum mines and potentially two joint ventures in South Africa up for sale after agreeing on July 7 to divest its 50 percent stake in Lafarge Tarmac to joint venture partner Lafarge SA for at least $1.5 billion.
Of 69 assets held by the sprawling group, 31 are delivering just 2 percent of earnings before interest and taxes, Cutifani said in a May interview.
The company has nine more assets identified for potential sale, Cutifani said today. “Nine other assets isn’t a bad number in terms of things we are looking at as potential sales. But that number doesn’t really matter, as we will continually improve the portfolio and look for the right opportunities.”
Chris Griffith, chief executive officer of Anglo’s platinum unit in South Africa, targets the sale of assets by the end of 2015, Cutifani said on a conference call. “That may be a little bit optimistic, but certainly that would be the target we would like to achieve,” Cutifani said.
Private equity and other mining companies could be attracted to the platinum assets, while a buyer with experience in South Africa would be favored, Cutifani said.
“We would want to make sure that what we do would be acceptable to the key stakeholders,” he said. “It has to be someone we see as credible, we see as having the ability to do a good job socially, and would give the assets the best chance of a future. And in that respect I guess that somebody with South African experience would be more likely.”
The platinum business may fail to achieve the return on capital target by 2016, even after the asset disposal, Cutifani said. The company is exiting its high-cost labor-intensive mines and focusing on open-pit and more mechanized projects, such as Mogalakwena in South Africa.
“Exit will be an important step towards driving higher returns, but Chris’ ability to continue on improving Mogalakwena and his continuing focus on operations improvement will also be important,” Cutifani said, referring to the CEO of Anglo American Platinum Ltd. “I’ve got no doubt that platinum will make a significant contribution in 2016 in terms of ROCE targets, but I’m not sure whether it will be at the target level.”
Anglo’s underlying first-half earnings rose to $1.28 billion, or $1 a share, from $1.25 billion, or 98 cents a share, a year earlier, the producer of iron ore, copper, coal and diamonds said today in a statement. That beat the $1.15 billion average of analyst estimates compiled by Bloomberg. Anglo will pay a dividend of 32 cents a share.
Net debt was $11.5 billion at the end of June, the result of $19.9 billion of debt offset by $8.5 billion of cash and cash equivalents, the statement shows.
“I expect our divestments and improved business performance to support a long-term net debt target of $10 billion to $12 billion,” Cutifani said in the statement.
Anglo plans to start producing its first iron ore in Brazil by the end of the year after cost over-runs and delays at its Minas-Rio project.
“At the end of June, we had completed 95 percent of the project required to achieve this objective,” Cutifani said. “We are commissioning all areas of the operation and expect to complete within the budgeted total capital cost of $8.8 billion.”
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