Anglo American has completed its acquisition of the Serra da Serpentina iron ore project from Brazilian miner Vale as the group’s promised restructuring in the wake of BHP’s unsuccessful bid continues apace.
The project, which will be integrated into Anglo’s Minas-Rio operation in Brazil, takes the group a step closer to delivering the portfolio transformation plan proposed by CEO Duncan Wanblad in May to keep shareholders on board after rebuffing a R700bn-plus offer from BHP earlier this year.
Under the terms of the transaction, Vale will transfer the project to Anglo and pay $157.5m cash in return for a 15% stake in the combined operation. Vale also has the option to increase its stake by a further 15%, for cash, if certain events relating to a future expansion of Minas-Rio occur.
The deal comes days after the expiry of a six-month standstill period for BHP in its potential quest for Anglo, though some analysts have said BHP’s determination to expand its copper portfolio remains a strong motivator for another offer.
Wanblad hopes to increase shareholder returns by focusing Anglo’s portfolio on copper, premium iron ore and crop nutrients while offloading its steelmaking coal, platinum group metals (PGMs) and nickel units, along with diamond business De Beers.
“This is a compelling example of industrial logic — putting together the contiguous resources of Minas-Rio and Serpentina to unlock significant value,” Wanblad said.
The integration will create “material synergies” by using Minas-Rio’s infrastructure to accelerate the development of Serpentina.
Serpentina’s total ore body strike length is more than double that of Minas-Rio. The resource, which contains 4.3-billion tonnes of iron ore, has higher grades and softer, friable ore that translates into extraction at lower unit costs and less capital expenditure.
The integration will also enable Anglo to double its production of premium-grade pellet feed products, which will help Anglo’s steelmaking customers decarbonise their processes.
The pellets are used in direct reduced iron (DRI) steelmaking, which emits significantly less carbon than traditional blast furnace methods.
“The Minas-Rio DRI-grade product already sells into one of the most attractive growth and premium segments available in our industry today,” said Wanblad.
“The optimal development pathway is already being assessed as part of the pre-feasibility work with new options created by the fact that we will now be able to access Vale’s rail and port logistics.”
Kumba, the group’s SA iron ore business, has taken similar steps this year, developing a margin-enhancing UHDMS processing technology at its Sishen mine. The technology will enable Sishen to treble its proportion of premium-quality production volumes.
“Together these initiatives will significantly enhance our global premium iron ore business and position it even more strongly for future demand trends — another valuable step as we create a world-class copper, premium iron ore and crop nutrients business,” Anglo said in a statement.
Last month, the mining house announced it would sell its steelmaking coal business and generate as much as $4.9bn in total cash proceeds.
In an announcement detailing the Serra da Serpentina agreement, Wanblad emphasised that “all the transactions to deliver our portfolio transformation are well in train — the demerger of Anglo American Platinum (Amplats) is expected by mid-2025 and we have seen strong interest in our nickel business, with the sale process well progressed”.
Wanblad said the group expected De Beers to follow, “recognising its unmatched industry and brand position and good progress in working with stakeholders to position the business for long-term success as we work towards separation for value”.
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