Gaborone: Anglo American has dismissed reports that it deviated from the course of action when it decided last year to focus on its strongest market positions in diamonds, PGMs and copper.
The group has an 85 percent stake in De Beers, which produced 7.4 million carats during the first quarter of the year compared to 6.9 million carats, a year earlier.
“I would ask you to cast your minds back to the circumstances of just over a year ago, when the mining industry and commodity prices were on the floor,” said group chairperson Sir John Parker.
“At that time, in the aftermath of $6.4 billion having been wiped off our own underlying EBITDA in the previous two years in aggregate, and with scant prospect of an early uplift in prices, Anglo American's clear imperative was to take bold action to bring down our net debt quickly to a manageable level.
“So we accelerated sale processes, already under way in some cases, and broadened the range of assets so as to create competitive tension across those processes, with a clear commitment not to accept undervalued prices, particularly for quality assets that we would not normally have offered for sale.”
Anglo chief executive Mark Cutifani also praised their diamonds business as global in scope and scale.
“While each asset may not be Tier 1 in its own right, the aggregation of assets under the De Beers business adds breadth and value to our customer product offering,” said Cutifani.
“In PGMs, we are building on our quality resource base and we understand the imperative to have our assets occupy the left hand side of the cost curve. We also need to push along with market developments that we see for fuel cells and jewellery.”
“In Copper, we have significant potential from our existing resource base - in Peru, in Chile and longer term in Finland - but we are not yet at the scale and quality where we would like to be and so we have work to do.
He also said that the group delivered on its “key” commitments last year as it delivered free cash flow of $2.6 billion, well above its target while net debt was reduced to $8.5 billion - well below the $10 billion target.
Meanwhile, said Anglo’s aim in future was to have a more robust balance sheet and increase the resilience of each of its business streams to the price volatility that characterises the mining industry.
He said the group was also planning to reinstate the dividend by the year-end on a payout-ratio-based policy.
Parker said that the fortunes of the mining industry would inevitably continue to be influenced by developments in China, where the authorities recently reduced the country's growth target for 2017 to 6.5 percent as the country seeks to balance its economy through a mixture of stimulus and managed slowdown.
He said China's “admirable efforts” to improve air quality may boost demand for some of the higher-quality and cleaner-burning iron ore and coking coal that Anglo is well positioned to supply for steel making.
“Widespread expectations of continuing slow growth in many regions of the world outside of Asia, accompanied by uncertainty over how much of the reform programme, including its ambitious infrastructure plans, of the new and protectionist-leaning US administration can actually be achieved, may be a drag anchor on the global economy for some time to come,” Parker said.
