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All-round value unlock targeted in proposed demerging of Anglo Platinum and De Beers

Anglo American CE Duncan Wanblad

Anglo American CE Duncan Wanblad

14th May 2024

By: Martin Creamer

Creamer Media Editor

     

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JOHANNESBURG (miningweekly.com) – Diversified mining major Anglo American is targeting value elevation in its planned demerging of South Africa-based Anglo American Platinum (Amplats) and the envisaged divestment or demerger of Southern Africa-dominant De Beers.

In rejecting BHP’s second takeover offer, Anglo intends reshaping its portfolio to consist of copper in Peru and Chile, top-quality iron-ore in South Africa and Brazil, and the opportunity presented by the crop nutrients project in the UK.

Divested in a targeted beneficial manner will be Johannesburg Stock Exchange-listed Amplats, De Beers, steelmaking coal in Australia, care-and-maintenance, or sale of nickel interests, as part of a portfolio review that began ahead of the BHP bid.

“We will now work towards demerging Anglo Platinum in an orderly way and we’re also exploring a full range of options to separate De Beers,” Anglo CE Duncan Wanblad told a media conference covered by Mining Weekly.

The aim is to make Anglo a higher-margin business with strong cash flow generation.

The expectation is that:

  • Anglo’s earnings before interest , taxes, depreciation and amortisation (Ebitda) margin will be elevated by 15% to an Ebitda of 46%;
  • operating cash conversion ­– the percentage of operating profit that converts directly to cash – will increase from 44% to 78%; and
  • return on capital will increase from 18% to 25%.

The new configuration will cost the Johannesburg- and London-listed Anglo $1.7-billion less than the business as it is currently, including an incremental $800-million of additional pre-tax, recurring, annual run-rate from the end of 2025.

On the diamond front, De Beers has still to finalise its sales agreement with the Botswana government.

In the meantime, Anglo is exploring options to separate the De Beers business in a way that it believes De Beers will have the flexibility to add value.

RENEWABLE ENERGY, GREEN HYDROGEN TRUCK

In response to Mining Weekly, Wanblad said that Amplats and Kumba will continue to want to be engaged in the 3 GW to 5 GW renewable energy project, along with Anglo itself.

Anglo announced earlier this year that jointly owned renewable energy venture with EDF Renewables, Envusa Energy, had completed the project financing for its first three wind and solar projects in South Africa.

The terms and structure of this non-recourse project financing are typical of high-quality renewable energy infrastructure assets.

These three renewable energy projects, known as the Koruson 2 cluster of projects and located on the border of the Northern and Eastern Cape provinces of South Africa, will have a total capacity of 520 MW of wind and solar electricity generation, with Amplats, Kumba and De Beers committing to 20-year offtake agreements with Envusa.

“We recognise how much this energy is needed,” said Wanblad, adding that Anglo was not backing away from commitment to setting up renewable energy infrastructure.

He reiterated that the hydrogen truck development that had been trialled at Amplats' Mogalakwena mine in Limpopo, had been placed into a separate company to attract different forms of capital to develop the green hydrogen mine haulage on a far bigger scale.

“The world needs to decarbonise and in all of mining, one of the biggest constraints in terms of Scope 1 and Scope 3 emissions are the emissions associated with diesel motion. All mines will need to decarbonise the business rapidly,” he said of upcoming potential demand for the hydrogen truck, of which 40 would likely be needed at Mogalakwena alone.

Anglo stated in a release on Monday that it was setting up Amplats to be able to deliver sustainable returns despite the current cyclical downturn of platinum group metals (PGM)

Collaboration between the PGM mining company and Anglo itself is aimed at the delivery of multi-decade cash flows.

Anglo stated that if it were to retain Amplats in its portfolio it would limit the ability of both companies to achieve their full potential.

TRANSITION TO GREEN STEEL

The quality of the iron-ore at Kumba, in the Northern Cape, and Minas-Rio in Brazil, is suitable for the transition to green steel and direct reduction iron, which is essential for the decarbonisation of the steel industry. Kumba has market-premiumed lump product described as being “fantastic”. The Ebitda contribution of the group’s iron-ore last year totalled $4-billion, up on the also-considerable $3.5-billion premium of 2022. Kumba’s lumpy ore has a 63% iron content.

This is more than Anglo’s copper contributions Ebitda of $3.2-billion in 2023 and $2.2-billion of 2022.

Edited by Creamer Media Reporter

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