Anglo Seeks to Acquire Assets at ‘Bottom of Cycle’ (Update2)
bloomberg.com
By Carli Lourens
Jan. 20 (Bloomberg) -- Anglo American Plc, the mining company that controls the world’s biggest platinum producer, said it’s looking to buy assets at the “bottom of the cycle.”
The “current market may offer opportunities to acquire capacity for less than it would cost to build,” the London- based company said in a presentation to investors today. Anglo is monitoring opportunities “closely” and will maintain a “disciplined approach” to deals, it said.
Mining takeovers have faltered after a slump in commodity prices sent share prices tumbling and financing became harder to obtain. Xstrata Plc in October dropped a planned 5 billion-pound ($7 billion) offer for platinum producer Lonmin Plc while BHP Billiton Ltd. in November abandoned a bid for Rio Tinto Group.
Anglo is “certainly not in the same debt position as Rio or Xstrata, so they maybe have a little more capacity to look at acquisitions,” James Bennett, an analyst at UBS AG, said by phone from Johannesburg today. “But I would’ve thought that running their debt down may have been first priority.”
Anglo declined 28 pence, or 2.1 percent, to 1,306 pence in London trading, cutting its market value to 17.2 billion pounds. The stock has slid 45 percent in the past year.
“Opportunities in, or with potential to move to, the lower half of the cost curve” will be considered if they have “significant scale and long life,” the company said.
Estimated Debt
Anglo estimated last month it had net debt of about $11 billion at the end of 2008. Its “only significant debt repayments” in the next two years were a $3 billion revolving bank facility due December this year and a 300 million-pound bond due in December 2010.
The company halved its planned capital expenditure for this year as a global economic slowdown cut demand. Anglo last month said it would delay the Los Bronces copper project in Chile by eight months. In Brazil, commissioning of the Minas-Rio iron-ore project and the Barro Alto nickel project were deferred by as long as a year.
Metal prices will “remain under pressure until fundamentals improve,” Anglo said today. As much as 15 percent of operations in the copper industry may be unprofitable, it estimated.
While copper and zinc inventories are rising, they’re not yet at “excessive” levels, it added. The nickel industry needs to reduce supplies after the stainless steel market collapsed, Anglo said.
Meanwhile, fundamentals for the phosphates market in the “medium term” look positive, Anglo said, adding fertilizer demand is expected to increase 2.6 percent a year until 2015. Niobium prices are expected to remain stable even as demand falls in the short term in line with steel production, it added.
To contact the reporter on this story: Carli Lourens in Johannesburg at clourens@bloomberg.net
Last Updated: January 20, 2009 11:56 EST |
