Anglo American jumped to the top of the FTSE 100 this morning after receiving a better price for its niobium and phosphates business than many observers had been expecting.
The South Africa-based miner is to sell the Brazil-based arm to China Molybdenum for $1.5bn (£1bn) in cash. Most analysts had been expecting the business to fetch around $1bn.
Anglo’s shares rose 3.5pc in morning trade, the fastest rising stock in the FTSE 100.
The proceeds from the sale will go towards paying down Anglo’s debt, which stood at $12.9bn at the end of last year. The miner is targeting net debt of $10bn by the end of 2016.
The niobium and phosphates arm went up for sale last year as part of Anglo’s sweeping plan to sell off nearly two thirds of its company to deal with a crippling downturn in commodity prices. The miner plans to offload ‘non-core’ businesses such as coal and focus on platinum, copper and diamonds.
The $1.5bn deal is the biggest yet of Anglo’s disposals and puts it closer to achieving its goal of raising $4bn from assets sales this year – a target many analysts had doubted it would achieve, given the parlous state of the mining industry and the scarcity of buyers.
Mark Cutifani, Anglo’s chief executive, called the sale a “positive step” in Anglo’s restructuring. “The proceeds from this transaction, together with the ongoing productivity and cost improvements we are driving through the business, will enable us to continue to reduce our net debt towards our targeted level of less than $10bn at the end of 2016,” he said.
Analysts at BMO Markets said: “[The deal] makes a significant inroad into Anglo American’s debt reduction programme, and potentially puts the company in a stronger negotiating position with regards to the rest of its asset disposal program.”
“This is positive for Anglo today, but these are among the best assets which are up for sale,” added Des Kilalea, analyst at RBC Capital Markets.
Noibium is a component used in high-strength steels, while phosphates are key ingredient in fertiliser. The business made $69m in pre-tax profits in 2015.
The deal depends on regulatory approval from China, but Anglo said investors holding up to 63pc of China Molybdenum backed the transaction, which should close in the second half of the year.
China Molybdenum is dual-listed in Shanghai and Hong Kong and specialises in the mining and trading of metals such as tungsten, molybdenum, copper, gold and silver.
Having been the worst-performing stock in the FTSE 100 last year, crashing 70pc, Anglo has staged something of a recovery in 2016. Its shares are now down 37pc compared to this time last year.
Read more from original source: http://www.telegraph.co.uk/business