Anglo American PLC's (LSE:AAL) plans to slim down its sprawling mining empire have hit a bump after US rival Peabody Energy pulled out of a $3.8 billion agreement to buy its steelmaking coal assets in Australia.
Peabody had agreed last year to acquire Anglo’s portfolio of metallurgical coal mines in Queensland, but the deal collapsed this week following a gas ignition incident at the Moranbah North mine in March.
Anglo insists this event does not count as what lawyers call a “material adverse change”, essentially a significant negative event that can void a contract, and says it will take the matter to arbitration to claim damages for wrongful termination.
Citi’s analysts describe the move as no surprise, noting that the market had already priced in the likelihood of Peabody walking away.
While the collapse does delay Anglo’s efforts to simplify its portfolio, the broker highlights that management has flagged other potential buyers. In other words, a sale could still happen, just to a different counterparty.
JP Morgan takes a similar line. Its mining analysts said the bank had already assumed the deal would not go ahead, and had excluded any cash proceeds from its forecasts.
That means today’s announcement will not prompt any material change to earnings estimates.
JPM expects production at Moranbah to resume in the first half of 2026, eventually ramping up to almost seven million tonnes a year by 2028. The bank values Anglo’s coal arm at around US$3.9bn, about 10% of the group’s current market capitalisation.
Shares in Anglo actually rose 3% on the day of the announcement, suggesting investors were braced for the news.
Still, JPM remains cautious. The bank points out that Anglo trades at a significant valuation premium to its peers, on roughly 8.8 times forecast 2025 earnings before interest, tax, depreciation and amortisation (EBITDA) compared with five to six times for the wider diversified mining sector.
That premium, it argues, looks hard to justify given the company’s ongoing restructuring challenges.
For now, Anglo’s path to streamlining remains open, but the company faces the twin tasks of finding a new buyer and navigating a potentially messy legal dispute with Peabody. Investors appear relaxed in the short term, but the longer-term rerating story looks more complicated.