Anglo to Sell Niobium, Phosphate Business for $1.5 Billionby
Sale to China Molybdenum exceeds expectations: Bernstein
Anglo seeking to reduce debt by as much as $4 billion in 2016
Anglo American Plc will sell its niobium and phosphate unit for $1.5 billion in cash, the mining giant’s first big disposal since announcing a plan to cut debt and turn around a struggling business.
China Molybdenum Co. agreed to buy the division and the transaction is expected to be completed in the second half of this year, London-based Anglo said in a statement Thursday. Anglo rose as much as 5.8 percent in London.
The deal is part of an overhaul plan set out by Chief Executive Officer Mark Cutifani after a slump in global commodity prices saw Anglo become last year’s worst performer in the U.K.’s FTSE 100 Index. It’s selling more than half its mines and exiting iron ore and coal to focus on its more profitable assets -- diamonds, platinum and copper. That, and a rebound in raw material prices, led to the miner more than doubling in value this year.
“The price achieved is above expectations,” said Paul Gait, an analyst at Sanford C. Bernstein Ltd. “That it has now been announced should bring comfort that this restructuring process is very real and in the execution stage.”
Bank of America Corp. said in a note Thursday that it had valued the business at $800 million to $1.1 billion, while Investec Plc said it had a net present value of $991 million. The unit mining niobium, a metal used to make specialty steel products, operates one mine and three processing facilities. In phosphates, the deal will include a mine, processing plants and chemical complexes.
Anglo wants to raise $3 billion to $4 billion in asset sales this year to cut its debt to below $10 billion. While it has already offloaded coal assets for nominal fees, this deal is the first big step to reaching that goal.
The company in February fleshed out plans that already included cutting staff by 85,000 and suspending its dividend. It’s also in the process of selling its nickel business in Brazil and coal mines in Australia and South Africa. Cutifani told investors last week that Anglo had appointed advisers and spoke with potential buyers for those assets.
“According to the timeline set out by the company at its results, we should expect some combination of further coal and nickel asset sales to make up the remainder of the 2016 target,” Gait said.
Anglo rose 5.8 percent to 737 pence by 3:33 p.m. in London. The shares reached an eight-month high last week, rebounding from last year’s 75 percent plunge.
The niobium and phosphate business had sales of $544 million last year with earnings before interest, taxes, depreciation and amortization of $146 million. It produced 6,300 metric tons of niobium and 1.3 million tons of phosphate concentrate.
Bankers at Deutsche Bank AG and Barclays Plc advised China Molybdenum Co., while Goldman Sachs Group Inc. and Morgan Stanley advised Anglo America.
Cia. Brasileira de Metalurgia & Mineracao, controlled by the billionaire Moreira Salles family, dominates the supply of niobium after starting operations in 1961. CBMM, as the Araxa, Brazil-based company is known, sold a 30 percent stake to a group of Asian steelmakers in two transactions worth $3.9 billion in 2011.