Anglo suffers third downgrade this week

Johannesburg – Global mining company Anglo American’s credit rating was downgraded to junk by Standard & Poor’s (S&P) yesterday, making it the third agency to do so this week.

S&P downgraded its ratings to BB/B from BBB-/A-3, citing the prolonged downturn in commodity prices and negative free cash flows at many of the company’s mines, but said that the outlook on the rating was stable.

Read: Fitch move adds to Anglo’s woes

A slump in the prices of commodities such as coal, copper, and iron ore forced Anglo to announce significant asset sales on Tuesday. Moody’s Investors Service and Fitch Ratings also cut their ratings on the company’s debt to junk earlier this week.

All three agencies have also questioned the company’s plan to raise cash by selling its assets as the low prices of commodities decrease the value of its mines. Anglo had $12.9 billion (R202.40bn) of debt at the end of last year, more than three times its earnings before interest, tax, depreciation and amortisation for the year.

 

Anglo was working with Bank of America on an expanded sale process for its non-core coal mines in Australia, as it shrank its operations by more than half to weather the global commodity-price rout, people with knowledge of the matter said.

Anglo is being advised by Bank of America on the divestment of its Moranbah and Grosvenor metallurgical coal assets, and it has started talks with potential buyers, according to the people, who asked not to be identified as the information was private.

Existing sale processes for Anglo’s Dawson and Foxleigh coal operations, which were also being run by Bank of America, were continuing with final bids expected in the next few weeks, the people said.

A representative for Bank of America declined to comment. A spokeswoman for Anglo also declined to comment. She referred to a February 16 statement, which confirmed that a sale process for the Moranbah North, Grosvenor and Moranbah South assets was under way.

South32 said it was willing to acquire Anglo’s stake in their manganese joint venture, the world’s biggest producer, if the price was right. Anglo is seeking to raise about $4bn from selling mines.

“We know the assets well and collectively we think they are the best in the industry today. We operate and market 100 percent of the product, so we know their true value,” South32 said yesterday. “As a joint venture partner with a deep understanding of their value, we would be a buyer if the price is right.”

Manganese assets held jointly by South32 and Anglo include mines and smelters in South Africa, the Gemco mining operations at Groote Eylandt in Australia’s Northern Territory and the Temco alloy plant in Tasmania.

South32 is the operator and has a 60 percent stake in the Samancor joint venture, with Anglo holding 40 percent, according to the Perth-based company.

A restructuring of South32’s manganese unit in South Africa announced this month would reduce costs, cut production and about 620 staff, chief executive Graham Kerr said.

Anglo’s share price was down 0.80 percent to R96.58 at the JSE close yesterday. South32 shares were up 1.24 percent at R13.87.

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