‘We don’t need cash’

Car­roll says group ‘has long­est life re­sources and ex­cel­lent op­por­tu­ni­ties’

Finweek English Edition - - Companies & Markets - DAVID MCKAY

AN­GLO AMER­I­CAN – the R309bn re­sources group – isn’t in need of fi­nance, says CEO Cyn­thia Car­roll, who added that the group “tends to think pos­i­tively” about prospects for met­als. “I don’t think a rights is­sue is nec­es­sary,” Car­roll says of spec­u­la­tion its bal­ance sheet is still rel­a­tively con­strained and might re­quire tweak­ing in or­der to lift flex­i­bil­ity. “The fun­da­men­tals of the in­dus­try haven’t changed,” says Car­roll. “When the up­swing comes it will be pos­i­tive and we’ll be bet­ter po­si­tioned to take ad­van­tage.”

It was re­ported on 15 June that in­vestors had turned against Car­roll for a num­ber of rea­sons, in­clud­ing fears An­glo may need to pump cash into De Beers, the di­a­mond group in which it has a 45% stake.

Said The Times of Lon­don: “De Beers is in ne­go­ti­a­tions with bankers over US$1,5bn of debt sched­uled to be re­paid in March. An­glo share­hold­ers are con­cerned that De Beers may need a cash in­jec­tion.”

The news­pa­per added share­hold­ers were push­ing for a tie-up with Xs­trata, an­other Lon­don-listed di­ver­si­fied miner – a de­vel­op­ment Car­roll says isn’t on the agenda. “You never know the fu­ture, but An­glo has the long­est life re­sources and ex­cel­lent op­por­tu­ni­ties.”

In a re­cent note, RBC Cap­i­tal Mar­kets said An­glo’s bal­ance sheet re­mained a con­cern, with its debt to cap­i­tal ra­tio at around 31% as at year-end 2008. “We con­tinue to feel the com­pany’s debt to cap­i­tal ra­tio could ham­per flex­i­bil­ity in the near fu­ture,” it said.

Di­ver­si­fied min­ing groups, in­clud­ing An­glo, have sought a num­ber of ways to shore up their bal­ance sheets amid the eco­nomic cri­sis, which has seen met­als prices

plum­met – in­clud­ing rights is­sues.

An­glo has raised $4,7bn in new debt, in­clud­ing a bond and a con­vert­ible bond, as well as the $1,8bn dis­posal of its re­main­ing shares in An­gloGold Ashanti. René Me­dori, the An­glo group’s chief fi­nan­cial of­fi­cer, re­cently said it had enough fi­nance for 18 months.

Ear­lier this year An­glo passed the fi­nal div­i­dend, the first time it hasn’t paid a div­i­dend in 70 years. Com­ment­ing on that de­ci­sion, Car­roll says it was “a tough de­ci­sion” but added not one of the group’s share­hold­ers had “told me it was the wrong thing to do” once it had been ex­plained. “We knew that was go­ing to be tough. But we had to pre­serve our cash and the BBB [credit] rat­ing was very much in our minds.”

Car­roll ac­knowl­edges buy­ing Mi­nasRio, an iron ore prospect in Brazil, had af­fected the group’s fi­nances. “There’s no doubt the trans­ac­tion has put pres­sure on us. But that’s a short-term con­cern. We’re here for the long term – for 20 years from now,” she says.

Com­ment­ing on the met­als mar­kets, Car­roll says the re­ces­sion world­wide would con­tinue to dampen prospects well into next year but that eco­nomic growth in China looked likely to be higher than ex­pected this year. “China’s stim­u­lus pack­age launched by its gov­ern­ment (which in­volved loos­en­ing credit growth re­stric­tions and im­prov­ing money sup­ply) is hav­ing an im­pact on com­mod­ity de­mand in a pos­i­tive way,” says Car­roll. “We’ve never sold more iron ore than now.”

Car­roll added that the cost of iron ore pro­duc­tion in China is lead­ing do­mes­tic out­put down­wards and pro­vid­ing op­por­tu­ni­ties to ex­porters. Platinum jew­ellery sales are also “ex­tremely high” – off­set­ting the down­turn in au­to­cat­a­lyst de­mand. And “met [met­al­lur­gi­cal] coal has been pretty strong for us”.

In a note this month, bank­ing group Gold­man Sachs sug­gested the end of Chi­nese de-stock­ing of cop­per, signs that de­stock­ing may end in Europe and then a sud­den, sur­pris­ing surge in new in­vest­ment flows would be a promis­ing sign for cop­per, a metal that of­ten pre­saged trad­ing be­hav­iour for other met­als.


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