Anglo American PLC (LSE:AAL) is shaping up to become a drastically different business after offloading its multi-billion-dollar Australian metallurgical coal assets.
The FTSE 100-listed miner is set to receive US$4.9 billion (£3.9 billion) from multiple disposals under a large-scale corporate streamlining plan.
Combined with other divestments, including its Amplats platinum business, Anglo American will have shrunk from six divisions to two producing divisions in the form of copper and high-grade iron ore.
Analysts, however, are split over the near-term benefits arising from these divestments.
Poison pills removed
Deutsche Bank has helmed the bullish faction with a share price upgrade from 2,700p to 2,900p.
“Following years of slow transformation, this plan will simplify the structure, remove long-standing poison pills and increase the exposure to copper,” said the bank.
According to Deutsche analysts, these plans have the potential to lift EBITDA margins to over 50% (they sat at 33% in the last financial year) with a material improvement in free cash flows.
“We continue to believe that the simplification of the company could unlock further value over the next 12 months, with added upside optionality from M&A,” Deutsche analysts added.
Panmure Liberum analysts were less optimistic in a new research note.
Too cheap?
The $3.8 billion cash consideration for Anglo’s Aussie mines (excluding the $1.1 Anglo will get from the sale of its stake in the Jellinbah joint venture), includes a large contingent element. This is a sore spot for Panmure analysts.
“Given Anglo American controls these assets you might have expected a higher price,” they stated.
Anglo shares are a sell with a 2,009p target price, in Panmure’s view.
Citi analysts, however, are less fussed about the size of this cash consideration.
They stated: “We had $2.9 billion value for the business in our model (excluding contingent payments), which compares positively to $3.6 billion clean payment.
“The price-linked earnouts of $550 million looks to be based on price levels which should be achievable in a strong met coal market in our view while.”
Citi’s one caveat concerns the $450 million linked to the restart of the Grosvenor mine, which “looks more uncertain”.
Anglo American shares are currently swapping for 2,359p, representing a 20% year-to-date gain.