Anglo’s Wanblad says “nothing off the table” in portfolio review

Duncan Wanblad, CEO of Anglo American, speaks during the World…

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Duncan Wanblad, CEO of Anglo American, speaks during the World Mining Congress in Brisbane, Australia, on Tuesday, June, 27, 2023. The conference runs through June 28. Photographer: Ian Waldie/Bloomberg via Getty Images

ANGLO American CEO Duncan Wanblad on Thursday unveiled a “systematic” review of the group’s portfolio in which he promised “further actions” aimed at unwinding complexity and tackling uncompetitive assets, especially in markets undergoing structural change.

“We are in the process of systemically going through all assets to assess their fit in the portfolio,” he said in a press conference. “Nothing is off the table.”

Anglo reported a 58% decline in 2023’s basic earnings which came in at $2.06/share. The main culprits were the group’s 79% owned platinum group metals (PGMs) company Anglo American Platinum and its 85% owned diamond miner and marketer, De Beers.

The asset-by-asset review with consider its plans, the timing of the market cycle in which it operates, and any “frictional cost of change” that might be extracted as part of an efficiency drive that was also announced today.

Wanblad said operational costs savings of $1bn has been targeted for the year-end – of which half had already been extracted in a now completed head office review – and a further $1.5bn would be taken out of Anglo American’s capital expenditure allocation. Earlier this week, jobs cuts to permanent employees of up to 470 and 3,700 were announced at Kumba Iron Ore and Amplats respectively.

Lower average prices for PGMs and diamonds accounted for most of the $4.55bn decline in Ebitda to $10.5bn for the 12-months ended December.

Asked if PGMs and diamonds were vulnerable in the portfolio review, Wanblad said markets for both assets had been disrupted – by battery electric vehicles in the PGM sector, and lab-grown diamonds – but he also sought to downplay the structural impact to either. The penetration of lab grown diamonds had started to slow and pricing would revert to cost as the industry became more transparent, Wanblad said.

However, he said there was “a watching brief” on De Beers, adding that: “There is a level of uncertainty we can’t deny and we are taking material actions to make it more robust.” De Beers has targeted $100m in cost reductions this year amid a likely lower-for-longer slump in prices. Diamond price recovery would be U-shaped rather than V-shaped, he said.

Based on its second half loss, De Beers booked a $1.6bn impairment for the 2023 financial year. Anglo also impaired its nickel asset following a 40% slump in the metal’s price.

The role of De Beers in Anglo American has long been questioned by analysts. Bank of America speculated earlier this month as to whether Anglo would consider monetising De Beers’ retail arm as it was “an under-appreciated source of value”.

The diamond group produced a lower than planned 25 million carats for the year compared to guidance of 30 to 33 million carats.

Wanblad said there had been some ‘in-bound’ offer for assets but he was yet to consider them.

Asked to comment on group complexity, Wanblad said that “given a blank piece of paper, I wouldn’t have the corporate structures set up they way they are today. There is an implicit level of complexity.”

Minas Rio

In a separate announcement, Anglo’s Minas Rio mine in Brazil will incorporate the neighbouring iron ore property Serra da Serpentina resources owned by Vale. In terms of the transaction Vale will pay Anglo $157.5m for a 15% stake in the enlarged mining area.

In addition to Serra da Serpentina, Anglo will also have access to Vale’s rail line and Tubarão port to transport expanded output. Access to additional logistics will also serve as an alternative to the construction of a second pipeline to Anglo’s current port facility at Açu.

There is also provision for purchase price adjustments if the benchmark iron ore price falls below $80/t (to Anglo) or above $100/t (to Vale) for a period of four years.

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