Major mining assets change hands

Large mining companies are selling off some of their prized assets after the prolonged global commodities markets rout left some with high levels of debt.

 

Anglo American, Glencore and Freeport have been at the forefront of those companies cutting debt, but BHP Billiton and Rio Tinto have also been looking to rationalise their assets while signalling an interest in acquisitions.

Shares in mining firms have recovered this year with investors reckoning that commodity prices have finally bottomed out after the prolonged slump.

Slower growth in China triggered the slide in the prices of raw materials, and Chinese companies are now the main potential buyers of assets on sale, aiming to secure natural resources as the economy expands. China Molybdenum, for example, snapped up two assets in less than a fortnight.

Following is a list of the main mining companies, their debt as a ratio to core earnings (EBITDA, or earnings before interest, tax, depreciation and amortisation), some of the main sales so far and what assets are still on offer:

BHP Billiton

  • Market capitalisation: USD66.2 billion
  • Net debt: USD25.9 billion (company reported in February)
  • Ratio of net debt to EBITDA: 2.13 (Bernstein)
  • Share price movement this year: up 5.3%
  • Market capitalisation: USD53.2 billion
  • Net debt: USD13.8 billion (company reported in February)
  • Ratio net debt to EBITDA: 1.2 (Bernstein)
  • Share price movement this year: down 1.5%
  • Market capitalisation: USD27.6 billion)
  • Net debt: USD5.9 billion (company reported in March)
  • Ratio net debt to EBITDA: 2.3 (Bernstein)
  • Share price movement this year: up 49.9%
  • Market capitalisation: USD$21.3 billion
  • Net debt: USD27.7 billion (company reported in April)
  • Ratio net debt to EBITDA: 2.8
  • Share price movement this year: up 20.6%
  • Market capitalisation: USD13.2 billion
  • Net debt: USD20.4 billion (Jefferies in May)
  • Ratio net debt to EBITDA: 5.6 (Jefferies)
  • Share price movement this year: up 57%
  • Market capitalisation: USD11.4 billion
  • Net debt: USD12.9 billion (company reported in February)
  • Ratio net debt to EBITDA: 2.4 (Bernstein)
  • Share price movement this year: up 115.8%
  • Market capitalisation: USD5.9 billion
  • Net debt: USD525.4 million (company reported in March)
  • Ratio net debt to EBITDA: 0.94 (Bernstein)
  • Share price movement this year: down 10%
  • Market capitalisation: USD4.2 billion
  • Net debt: USD4.8 billion (Bernstein in April)
  • Ratio net debt to EBITDA: 3.7 (Bernstein)
  • Share price movement this year: up 80.5%

The world's largest exporter of metallurgical coal, BHP has agreed to sell its coal assets in Indonesia to partner Adaro Energy for an undisclosed sum.

Sources say BHP may also be seeking to buy some coal assets from Anglo American.

In 2015, it spun off South32 to focus on its core business and has said it is particularly interested in buying copper assets.

Rio Tinto

Rio has been seeking to offload less profitable businesses. Last year, it agreed to sell its 40% stake in the Bengalla coal mine in Australia to New Hope Corp for USD606 million.

It sold Mount Pleasant thermal coal to Salim Group's MACH Energy Australia for USD224 million in January. Rio Tinto has been running an on/off process to sell its Hunter Valley assets although no deal has been struck.

The miner is also shifting its emphasis to copper and said it will no longer fund major expansions in iron ore as that market reaches saturation.

Glencore

Glencore has said it is aiming to cut its debt to between USD17 billion and USD18 billion by the end of this year by selling assets worth USD4-5 billion, after it took a heavy beating on the stock market in late 2015.

This year, it has agreed to sell 40% of its agricultural business to Canada's state pension fund for USD2.5 billion and sources say it is in talks to sell a further 9.9% stake.

In addition, it sold a 9.9% stake in its agricultural business to British Columbia Investment Management Corp for USD624.9 million. At the same time, Glencore Agri is taking on USD3.6 billion in debt currently funded by Glencore.

Glencore is considering selling its Vasilkovskoye gold mine in Kazakhstan, worth more than USD2 billion, sources close to the deal said.

It has been looking to sell its copper mines Lomas Bayas in Chile and Cobar in Australia, which analysts have valued at more than USD1 billion.

Glencore raised USD2.5 billion in a share sale last year and sold some copper and nickel mines for about USD290 million that it inherited when it bought rival Xstrata.

Vale SA

The Brazilian miner has been hit with charges to cover and repair damages after the Samarco dam collapsed at its iron ore mine last year.

The world's biggest iron ore miner has been in talks with Fortescue Metals Group that could see Vale taking a minority stake in the Australian company and blending their iron ore operations to win market share in China.

Vale has also handed its stake in Brazil's CSA steel plant to majority owner Germany's ThyssenKrupp AG for a token sum.

Freeport-McMoRan

Freeport-McMoRan has pledged to cut its hefty debt by as much as USD10 billion and said it will consider a ‘broad spectrum’ of asset sales.

The company has agreed to sell its majority stake in the Tenke copper project in the Democratic Republic of Congo to China Molybdenum Co Ltd for USD2.65 billion in cash. Freeport has an effective 56% interest in Tenke, one of the world's largest copper-cobalt deposits.

The Phoenix, Arizona-based company's portfolio includes the Grasberg mine in Indonesia and Cerro Verde in Peru.

In February, it sold a 13% stake in the Morenci open-pit copper mine to Japan's Sumitomo Metal Mining for USD1 billion.

The biggest US-listed copper producer said in January it would focus on divestitures and joint ventures, although it has so far failed to find a buyer for its oil and gas assets. It suspended its annual dividend last year.

Anglo American

The embattled miner is aiming to cut its debt to USD10 billion by selling USD3-4 billion of assets in 2016, including its iron ore, coal and nickel units.

It plans to retain only 16 core assets from 45 previously and also said it would review its Minas-Rio iron ore project in Brazil after three years.

So far, it has sold its niobium and phosphate businesses in Brazil to China Molybdenum for USD1.5 billion.

Anglo has also sold its stake in Australia's Foxleigh metallurgical coal mine to a consortium led by Taurus Funds Management for an undisclosed price.

Its metallurgical coal assets in Australia could be valued at about USD1.5 billion, sources have said.

Anglo is also seeking to sell nickel assets in Brazil, including the Barro Alto and Codemin mines, although offers so far had been too low to lead to a deal, sources have said.

Antofagasta

In July, the Chilean copper miner paid Barrick Gold Corp USD1 billion for 50% of the Zaldivar copper mine in Chile, an asset once dubbed the ‘Andean ATM’.

Antofagasta posted a worse than forecast fall in profit in March. Its chief executive said the company would monitor opportunities but saw no attractive targets at present.

First Quantum Minerals

The Canadian miner sold Finnish mine Kevitsa to Boliden in March, with the Swedish group paying USD712 million. The company had been seeking to reduce its debt levels by more than USD1 billion.

Reuters reported in November that First Quantum had been looking to sell the nickel-copper-platinum Kevitsa mine as well as Ravensthorpe, an Australian nickel mine.

First Quantum said in April the uncertainty regarding its ability to meet the net debt to EBITDA ratio covenant under its debt financing agreements had been removed.

Source: Reuters

 

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