(Feb 20): Anglo American plc took yet another writedown on its struggling De Beers unit and reported steady profits as its diamond operations continued to weigh on earnings.
Anglo American is in the process of a complete transformation of its business. As part of a strategy to fend off an approach from BHP Group in 2024, the company unveiled a radical restructuring plan that included exiting diamonds, coal and platinum. Since then it has struck its own deal to buy Teck Resources Ltd, to create one of the world’s biggest copper miners.
Yet for now the company is still stuck with diamonds and coal. The diamond industry is mired in one of its worst ever crises, while Anglo’s two flagship coal mines have both been halted due to fires.
Anglo reported a 2% rise in underlying earnings from its continuing operations, with profits of US$6.4 billion. It cut its final dividend by 27% from the same period last year. Copper and iron ore — the businesses that will underpin Anglo’s profitability once its restructuring is complete — remained its biggest earners. Net debt fell to US$8.6 billion.
The company took a US$2.3 billion impairment on De Beers, its third such charge in two years.
So far the company has successfully exited platinum by spinning off its South African assets, but divesting its De Beers and coal units is proving more difficult. It also slowed work on a major fertiliser project in the UK as part of its restructuring.
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On Friday it announced an investment agreement with Mitsubishi Corporation to support the future development of the Woodsmith mine, which could lead to the Japanese firm taking a 25% stake in the project.
Many Anglo investors are focused on the combination with Teck, with the company’s shares rallying more than 50% over the past year as copper prices have soared to record highs. Every top-tier miner is trying to increase it exposure to the metal, both by developing mines and looking to acquire their smaller rivals.
The Teck deal will give Anglo access to the Canadian firm’s portfolio of copper mines, including its flagship Quebrada Blanca mine in northern Chile, which neighbours Anglo’s Collahuasi project. Shareholders of both companies have approved the deal and the Anglo is now working on winning regulatory approval.
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