(Minews) - Anglo American is eyeing the sale of a cluster of coal assets in eastern Australia as the miner struggles to boost shareholder returns during a slump in commodities prices, people familiar with the matter said on Thursday.
The UK-listed miner, one of the world’s largest coal producers, is preparing to sell five mines in Queensland and New South Wales as part of a $3bn-$4bn asset disposal programme ordered by Mark Cutifani, chief executive.
Large mining companies including Vale and BHP Billiton are looking to dispose of or spin off non-core assets as they battle falling commodity prices and declining share prices. They are also under pressure to boost returns to investors. For Anglo American, a sale of assets would help strengthen its balance sheet.
Mines including Dawson and Foxleigh would be primed for a possible sale, the people close to the situation said. One of these people added that Bank of America Merrill Lynch was working with Anglo.
The miner said in December that it was selling the Callide mine as well as Dartbrook. Anglo and Bank of America declined to comment.
The mines earmarked for potential sale produce coal used for steel making or power generation.
Callide alone could fetch up to $1bn while Dartbrook, which is closed at present, could fetch up to $200m, analysts at RBC Capital Markets have estimated.
Mr Cutifani took over as chief executive of Anglo in 2013 with a pledge to pep up anaemic returns that lagged behind those of rival global miners even during a commodities boom.
The miner is also selling platinum mines in South Africa and copper assets in Chile as part of its worldwide disposal programme.
Seamus French, head of coal at Anglo, told investors in December that Anglo would begin asset sales in 2015, saying a part of the miner’s strategy was “to peg back the portfolio”.
“We have reviewed all the assets. The process is essentially complete, but pretty much every asset we have is involved in some sort of joint venture so there is a pretty detailed, lengthy consultation process to go through,” Mr French said.
Thermal coal, which is used to firepower stations, was among the worst performing major commodities in 2014. Weak demand and rising supplies from key producers such as Australia and Russia saw prices fall as much as 25 per cent to just above $60 a tonne, depending on the benchmark.
Prices have remained under pressure in the opening weeks of 2015. Australian thermal coal, the marker for the Asian market, has fallen 3 per cent and South African export prices are down 10 per cent. European prices have fared even worse, slumping 20 per cent as Russian exports have flooded the market.
Analysts say prices are unlikely to recover and could average less than $60 a tonne this year, the lowest level since 2006, partly because of protectionist policies in China.
At the same time falling oil prices and exchange rate benefits have thrown a lifeline to struggling high-cost coal producers, which had been expected to withdraw from the market and reduce global supplies.
One of the last big coal deals in Australia came in October 2013. Glencore, the Swiss-based resources company, and Japan’s Sumitomo paid $1bn for a 50.1 per cent stake in Clermont, Australia’s third-largest thermal coal mine.
