Anglo writes off De Beers and continues with business overhaul
Anglo American reported a $3.1billion loss on Thursday, after writing down its De Beers business. The company is continuing to shed unwanted assets.
Anglo wants to concentrate on iron ore and copper assets following BHP's failed attempt at a takeover last year. This means that Anglo will spin off its diamond and platinum businesses following the sale of its nickel and coal mines.
Duncan Wanblad, CEO of Codelco, said that the company is also exploring the possibility of running its Los Bronces mine in Chile jointly with Codelco.
Analysts said the plan would reduce costs and increase production at two mines adjacent to each other. This helped investors cheer.
Anglo London's listed closed at 2.5%.
George Cheveley said, "Two things really stood out today. The cost savings are showing up and the Chilean joint-venture is another big news for Anglo."
Wanblad stated that the process of selling or divesting diamond specialist De Beers will accelerate in the second part of the year.
According to the CEO, due to the current market conditions, the divestment of the diamonds business will only be possible in the second half this year.
Anglo was able to "bring the carrying value of [the business] down to a more realistic $4.1 billion" after a $2.9 billion De Beers writing-down, Jefferies analysts stated.
Competition from LAB-GROWN Stones
The $3.1 billion loss came after a $283 million profit in 2023 as metal prices declined and diamond sales were hampered by competition from lab-grown stone.
BHP, Rio Tinto, and Glencore, among others, reported that their earnings had declined for the second year in a row due to lower metal prices. This follows two years of record highs.
Anglo declared a $0.64 dividend per share or approximately $800 million. This is down from $0.96 previously.
Wanblad, a De Beers spokesperson, said that the company has a gem stockpile worth around $2 billion in a market where prices are persistently low.
He added that Anglo would keep evaluating whether to sell or list De Beers in order to exit the diamonds industry responsibly.
The CEO stated that the market conditions must be favorable to list and divest this unit. He would therefore prefer to sell it to a trade purchaser as soon as possible.
Wanblad said that the market conditions must be right for this to occur. "But we are more likely to be able execute on a short-term trade sale rather than a listing."
The joint venture mining plan in Chile has been in development for 13 years.
Cheveley of Ninety One said that "even though the synergies are very apparent, it takes a lot to get these things working together."
M&A activity in the mining sector increased to $26 billion by 2023. Sharing risks is another way of reducing costs.
Anglo announced on Tuesday that it is selling its Brazilian Nickel business for up $500 million. The CEO has said that it will use the $5.3 billion raised so far from selling its assets to reduce debt. Clara Denina reported from London and Felix Njini from Johannesburg. Kirsten Donovan edited by Barbara Lewis, Elaine Hardcastle and Emelia Sithole Matarise.
(source: Reuters)
