Anglo American to restructure operations into units focused on platinum, diamonds, nickel, copper, iron ore and coal
Anglo American plc (LSE: AAL) announced that it is going to restructure its businesses units to create a more streamlined management structure and further focus the Group on its core mining portfolio. The international mining group will create seven commodity business units (BU), additionally Anglo has decided to divest certain non-core assets.
Anglo American plc is one of the world's largest mining groups. Through its subsidiaries, joint ventures and associates, it has significant exposure to platinum group metals and diamonds through its interests in Anglo Platinum and DeBeers. Anglo also has significant interests in coal, base and ferrous metals, as well as industrial minerals. The international mining group is geographically diverse, with operations in Africa, Europe, South and North America, Australia and Asia.
The new single commodity focused business groups will each be located in the area of core geographic focus for the Business Unit. Each BU will be responsible for its operational performance and project delivery.
South Africa will host three key Business Units, the Platinum BU, Thermal Coal BU and Kumba Iron Ore BU. In South America, Anglo America’s Copper BU will be based in Chile, while Brazil hosts both the Nickel BU and Iron Ore Brazil BU. The seventh business unit, the Metallurgical Coal BU will be based in Australia.
The Groups overall management will be based in London, the management team lead by five directors will be responsible for corporate functions, provide strategic support to the BUs and ensuring the ongoing realisation of group-wide synergies.
Anglo American's decision to divest certain non-core assets builds on the initiatives completed over the last three years, including the demerger of the Mondi Group (LSE: MNDI) and the sale of the Group's shareholdings in AngloGold Ashanti (NYSE: AU). In addition to its other stock divestments in South Africa including Highveld Steel and Vanadium (JSE: HVL), Namakwa Sands and Tongaat Hulett (JSE: TON) and Hulamin (JSE: HLM).
Anglo American also said that they will divest its non-core operations including Scaw Metals, Copebrás, Catalão and the Group's portfolio of zinc assets.
Anglo American's portfolio of zinc assets includes the 100% owned Skorpion mine in Namibia and Lisheen mine in Ireland and the 74% owned Black Mountain mine and Gamsberg project, both in South Africa. In 2008, Anglo American's zinc businesses produced 340,500 tonnes of zinc, generating earnings of $209m.
The Scaw Metals Group manufactures a diverse range of steel products. Its principal operations are located in South Africa, South America, Canada and Australia. The group supply global construction clients, railway, power generation, mining, cement, marine, engineering and agricultural markets.
In 2008, Scaw produced 879,000 tonnes internationally, generating earnings of $309m. Anglo American holds 74% of Scaw South Africa and 100% of Scaw International.
Brazilian non-core businesses Copebrás and Catalão will be sold, Copebrás produces phosphate fertilisers and phosphoric acid, in the agriculturally-intensive Goías state of Brazil. In 2008, Copebrás produced 982,100 tonnes of phosphates, generating $244m. Anglo American holds a controlling interest of 73% of Copebrás.
Catalão is a Brazilian producer of ferroniobium, a key element used in the strengthening of steel and for superconductive materials and superalloys, such as in jet engines or MRI scanners. In 2008, Catalão produced 4,600 tonnes of niobium, generating $80m. Anglo American owns 100% of Catalão.
Including the Tarmac group, Anglo American’s non-core assets accounted for approximately 11% of the total group’s earnings in 2008.
According to Anglo, the divestment will be undertaken in a manner that will maximise value for Anglo American's shareholders. Preparatory work for the separation of these businesses from the Group's core operations has commenced. Anglo American will provide further updates on the divestments as appropriate.
Anglo American Chief Executive, Cynthia Carroll commented on the group’s decision, emphasising the group’s new focus going forward:
"I believe that these actions will position Anglo American well for sustained, profitable growth in the commodities we have identified as being the most attractive. The portfolio changes we have announced are the logical next step in focusing the Group on our core mining activities, enabling us to strengthen our balance sheet further.