Anglo plans massive overhaul to stave off BHP takeover

Duncan Wanblad

Anglo American will exit diamond, platinum and coal mining in a massive restructuring designed to fend off a takeover approach from rival BHP Group and turn the 107-year-old miner into a copper giant.

Anglo said Tuesday that it plans to demerge or sell its De Beers diamond business, separate its Anglo American Platinum unit and sell its coking coal mines in Australia.

It will also slow spending on a giant fertilizer mine in England. That will leave a much simpler company focused on iron ore and copper, a key metal for the energy transition.

It’s been forced to accelerate a turnaround plan after BHP proposed a takeover last month.

So far Anglo has rejected two proposals from BHP — the latest worth £34 billion ($43 billion) — saying they undervalue the company and the structure is unworkable.

Anglo is pinning its hopes on investors supporting its plan — and backing management to deliver it — rather than pushing to accept an offer from BHP.

Investors had been demanding Anglo come out with its own plan, and today’s move responds to what some shareholders were calling for.

“This is not the direction BHP wanted to go,” said Lachlan Shaw, an analyst from UBS Group AG.

“The Anglo rejection and this potentially will have caught them by surprise and they would maybe have expected to be engaged in further discussions.”

Anglo will now focus on copper mines and iron ore, its two biggest and most consistent earners and the businesses that BHP is most attracted to.

Perhaps controversially, it will also stick with its Woodsmith fertilizer project in the north of England some investors have pushed for it to quit. Still, it will dramatically cut spending. 

The company will also either sell or shutter its relatively small nickel business in Brazil.

The nickel market has been hammered by a flood of low-cost supply from Indonesia, and several miners have been forced to mothball production in countries including Australia and New Caledonia. 

The move to dramatically shrink and simplify its business has been years in the making at Anglo, which has always been a hotchpotch of commodities.

Yet the approach from BHP served as a catalyst for the company to speed up decisions it’s been sitting on for years.

De Beers — despite its status as a trophy asset — has looked increasingly out of place within the Anglo stable. The diamond market has become increasing volatile in recent years, whipsawing between boom and bust.

The challenges posed by changing consumer habits require more and more spending on things like advertising, an area outside the comfort zone of many mining investors.

Anglo said Tuesday that De Beers will either be sold or demerged. That will break the almost 100-year link between the two companies, with Anglo first becoming a major shareholder in 1926.

Anglo will also look to exit Amplats, as its platinum unit is called. The business is currently listed in South Africa, with Anglo as a majority owner. Its coking coal business, which lies adjacent to BHP’s mines, will also be sold and Anglo said it has already received approaches.

BHP had made demerging Amplats — and its South African iron ore unit — prerequisites for a bid. Anglo has said that was an unworkable proposition.

“The outcome of Anglo’s strategic review will not have changed BHP’s plans, but they are probably actively assessing where they are now in light of this,” said Shaw at UBS.

Anglo will also slow spending on a $9 billion fertilizer mine in northern England that’s been a focal point for investors and analysts who’ve been pushing for the company to overhaul its diverse portfolio of assets.

The company — which has been spending about $1 billion a year on the giant Woodsmith mine — will cut spending to about $200 million in 2025, and plans to spend nothing on it in 2026.

It will also look to bring in one or more strategic partners to syndicate costs on the project, it said.

Beyond the massive spending commitments, investors’ concerns about Woodsmith are heightened because it will produce a relatively obscure fertilizer product called polyhalite, and Anglo will need to create a massive new global market for it almost from scratch.