Anglo American share price: Miner faces hurdles in South Africa

on Feb 12, 2015
Updated: Oct 21, 2019

Anglo American (LON:AAL) is in talks with South Africa’s government over conditions for selling stakes in several coal mines as part of the company’s divestment plans, the Financial Times has reported. According to inside sources, cited by the newspaper, the FTSE 100-listed mining company is looking to offload majority ownership of three mines that supply thermal coal used in power generation by South Africa’s state utility, Eskom.

The South African government’s proposed conditions — which would include a requirement to fulfil ‘black economic empowerment’ targets by selling to black-controlled South African businesses — could limit Anglo’s freedom to restructure its local businesses. The proposals would also have to address how any new mine owners funded their share of investment, split between Anglo and Eskom.
The FT quoted a person familiar with the matter as say saying: “There is the empowerment aspect of government and there is a capital aspect — there’s a significant capital requirement which requires funding from Eskom and from Anglo American.”

As of 12:57 GMT, Anglo’s share price was 2.76 percent higher at 1,154.50p. The stock has been trading higher today, ahead of the group’s full-year results announcement. The miner will publish the figures tomorrow, and the consensus is for revenue of $27.34 billion and adjusted net profit of $2.1 billion, trading platform IG reports. These projections equate to a 6.8 percent drop in revenue and a 19 percent decline in adjusted net income.

Anglo American had a difficult year as falling commodity prices and industrial action kept the company’s share price under pressure. The company announced a 48 percent jump in first-half profits but that was largely down to higher production levels and favourable foreign exchange movements. The miner has been ramping up its production output in order to combat crumbling metals prices.
According to the FT, as of 6 February 2015, the consensus forecast amongst 51 polled investment analysts covering Anglo American has it that investors should hold their position in the company.
As of 14:09 GMT, Thursday, 12 February, Anglo American plc share price is 1,158.50p.