When Anglo American decides to exit a commodity is it a contra-cyclical indicator? Put more bluntly, if Anglo is getting out, should you be getting in?
The platinum price took off like a rocket the moment Anglo spun out its controlling stake in Anglo American Platinum, now Valterra, earlier this year. It was reminiscent of the way the coal price rocketed soon after Anglo spun out Thungela coal in 2021.
Also worth remembering is that Anglo planned to get out of iron ore in 2015, when it did the last big restructuring before the “portfolio simplification” it embarked on in the midst of BHP’s hostile bid last May.
Now it views iron ore — which it failed to sell back in 2015 — as core to its soon-to-be simplified portfolio. Once the exercise is complete Anglo will be a mini-me BHP, with the same three-commodity portfolio of copper, iron ore and fertiliser.
It has exited platinum; it has sold its nickel and (probably) its steelmaking coal assets. Still to come is the sale or listing of De Beers, though nobody expects the beleaguered diamond market to rocket any time soon.
By 2027 the plan is for Anglo to be just 60% copper and 40% iron ore, with the fertiliser project on ice for now. None of the commodities on which the group was built over more than a century will still be there.
When I asked Anglo CEO Duncan Wanblad, after Anglo’s interim results this week, whether lots of people had asked if he was sorry he let Valterra go, he said I was the only person who’d asked that question. And he’s thrilled, not sorry, at the share price gains.
But the group’s results gave pause to reflect on just how dramatically the world has changed since the London-listed mining group fended off BHP and started taking itself apart last May.
It said at the time that it had started the simplification before BHP came along. But it seems unlikely it would have been under pressure to go as far, or as fast, without the bid. And though Wanblad says he wouldn’t have done what he calls the “accelerated restructuring” any other way, what’s happened since then does raise interesting questions about mining companies and the market.
BHP is no longer the market darling it was, with its own expansion into fertiliser going badly, and seems not to have further designs on Anglo. Copper isn’t quite as darling either, with the Trump administration threatening tariffs.
It turns out electric vehicles aren’t imminently going to take over the world either, so platinum, which is in very short supply, will still be needed for conventional and hybrid vehicles for the foreseeable future. Question marks about China’s growth are weighing on iron ore.
None of which is to say it was all a bad idea. Anglo has a long history of parcelling out businesses to new owners, as it did when it did empowerment deals with Afrikaans entrepreneurs and later with Patrice Motsepe and Cyril Ramaphosa, or unbundled to its shareholders, as it did with AngloGold, Mondi, Thungela and most recently Valterra.
The companies have thrived as independents in ways they couldn’t under Anglo’s bureaucratic wing. And as Wanblad emphasised this week, investors have rewarded Anglo and Valterra richly for the deals done to slim down the portfolio so far. The deals have “daylighted” the value that sat within a complex Anglo portfolio the market didn’t understand, or didn’t like. More focus has prompted a strong rerating.
But if the market loves focus so much what role is there for diversified mining companies? Commodities go up and down. A mix used to be prized as protection from the swings and roundabouts. Using mature cash cows to subsidise new mines was also key to the model on which Anglo and its rivals were built. Now the market no longer wants a wide variety.
But the global majors aren’t single commodity companies either, even if Anglo and BHP’s two or three is hardly a spread. Wanblad talks about a sweet spot, between too many and too few. History will judge whether he’s found it. It’s clear though that SA’s iconic mining house is no longer.
• Joffe is editor-at-large.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.