Anglo trades weaker as it progresses with $5bn disposal of Queensland coal mines

Anglo American miners underground at its steel-making coal Aquila mine in Australia. SUPPLIED

Anglo American miners underground at its steel-making coal Aquila mine in Australia. SUPPLIED

Published Jul 9, 2024


Anglo American has been trading weaker on the JSE in the past seven days, a period in which the diversified resources firm has been rocked by an explosion incident at its Australian Grosvenor coal mine which, according to analysts, it is readying up to dispose of for an estimated $5 billion (R90.5bn).

At the end of last month, Anglo American said it had suspended production at the Queensland Grosvenor steel-making coal mine following an underground coal gas ignition incident that happened on June 29.

The group announced plans to break up its assets in May, including divestment of its steel-making coal after BHP withdrew its bid for the London and JSE-listed firm.

Anglo American’s plans for the disposal of the steel-making coal assets in Queensland, Australia, had been drawn back by the explosion last month at Grosvenor.

However, the company is preparing to sell the Queensland coal assets, mining industry sources said yesterday.

“Anglo is readying up the divestment although the explosion at Grosvenor had been a set back. The company wants to do away with the Queensland mines,” said a mining industry executive with knowledge of discussions around the issue.

Anglo American’s steel-making coal business was expected to produce 8 million tons in the first half of 2024 prior to the Grosvenor explosion.

The Grosvenor mine was expected to contribute 2.3 million tons.

Anglo American has said that it will provide an update to its steel-making coal production guidance later.

Nonetheless, analysts have put up the disposal value for the Queensland coal mines under Anglo American at $5bn, also highlighting that the company was progressing with a programme to divest out of the assets.

“American prepares its $5bn sale of Queensland coal mines… The $5bn valuation is based on sell-side analysts consensus estimates. (They) prefer to sell the entire portfolio to one buyer,” said market analyst, Martin Rogers.

He added that “unlike Thungela,” shareholders “don't get the option to hold on” to these assets.

“This will be a sale not an unbundling – at least at this stage of talks,” explained Rogers.

Shares in Anglo American slumped 0.52% at around 4pm on the JSE yesterday to trade at R563.26 per share.

In the past week, the company’s stock has slumped by 2.48% and by about 1.11% in the past 30 days.

According to Adrian Kruger, Anglo American shares were still 21% higher at the end of June compared to the start of the year.

He ascribed this to the strong run when BHP Group made an offer to buy the group a few months ago.

Market analyst Simon Brown told Business Report yesterday that the weakening in the share price of Anglo American and other resource stocks on the JSE yesterday was due to “a stronger rand hurting”.