Rise in Anglo American share price could offer chance to fill its coffers

Tue Mar 22, 2016 9:56am EDT
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By Pratima Desai

LONDON (Reuters) - The doubling of Anglo American's AAL.l share price since late January means the time could be ripe for a rights issue rather than an asset fire sale to boost its defenses against tumbling commodity prices, fund managers say.

The London-listed global miner has insisted it does not need to raise cash and that it plans to sell its iron ore, coal and nickel operations as part of a sweeping overhaul to raise $4 billion this year and cut net debt to $10 billion.

But fund managers say that disposals while commodities prices are bumping along the bottom are likely to take some time, with potential bidders holding off in the hope that assets could become cheaper.

"The recovery in Anglo's shares is a strong incentive for a rights issue," said Michael Hulme, a commodities equity fund manager at Cargminac.

"It might depend on how De Beers is doing, but it's hard to see how they can get away without a capital raise. There are some signs of stabilization, but fundamentals in commodity markets haven't changed."

Anglo is planning to concentrate on its De Beers diamond business as well as platinum and copper assets.

The company's share price, at about 544 pence, is more than double the levels of late January, when the stock fell to a record low below 220 pence. However, the sector-wide gains could prove fragile, with rises attributed largely to short-covering rather than long-term investors looking for value.

Anglo Chief Executive Mark Cutifani last month said that the industry could not rely on a reversal of the commodity price slump any time soon.   Continued...

The Anglo American logo is seen in Rusternburg October 5, 2015. REUTERS/Siphiwe Sibeko