Shares in Anglo American busted through £10 for the first time in more than a year on Tuesday, capping a remarkable recovery of the miner and cementing its position as the FTSE 100’s best performer of 2016.
As commodity prices plummeted in January on a China growth scare, and hedge funds placed bearish bets, Anglo’s share price slumped to a record low of 215p. A few weeks later Anglo responded to the price rout, launching the largest divestment programme in its 99-year history and a plan to focus on just three key commodities, writes Neil Hume.
While progress on the shrink-to-survive plan has been slow and the company has managed to sell only one asset, that hasn’t held Anglo’s stock price back. Its shares, changing hands for £10.23 on Tuesday, are up 240 per cent this year, significantly outperforming the FTSE 100 (up 13.5 per cent).
They have also outpaced Glencore another miner that has been in debt reduction mode and has arguably made greater progress with its deleveraging efforts. Glencore is up 142 per cent in the year to date.
Surprising rebounds in several of Anglo’s key commodities – coal and iron ore stand out – have driven the recovery alongside hedge funds scrambling to buy back their bearish bets.
Anglo has also benefited from the slump in the pound to a 31-year low against the US dollar. This is because the company, which is looking to reinstate dividend payments by the end of next year, generates earnings in US dollars.
Last week, Anglo received $1.5bn from the sale of its niobium and phosphate unit, putting it on course to meet this year’s target of $3bn from divestments
Anglo is also looking to sell two large coking coal mines in Australia but the sale process has been complicated by surging prices. Coking coal, a key ingredient in steel-making, has doubled in price to more than $213 a tonne since the start of July because of a string of supply disruptions and policy changes in China.
However, reports in the Australian press claim that Anglo has entered exclusive talks with a consortium headed by Xcoal, a US coking coal producer, on a sale.
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