Anglo American CEO Faces Investor Scrutiny After Rejecting BHP Takeover Bid

Investors will closely examine Chief Executive Duncan Wanblad's strategy update for Anglo American on Thursday, following the company's decision to reject a $49 billion takeover bid from BHP Group earlier this year. Wanblad and his team are set to present the first-half results, and must persuade investors that their focus on copper, iron ore, and a fertilizer project is the right path forward.

One of the key points of interest will be the potential sale of Anglo's coking coal assets in Australia, which Wanblad has indicated might happen soon due to significant interest. However, a recent fire at the Grosvenor mine, which has caused substantial damage and delays, might complicate these plans and impact the valuation.

Richard Hatch, an analyst at Berenberg, commented, "Clearly, any updates to the simplification strategy will be closely watched. Our key questions center on the challenges of selling the coal business and whether Anglo would accept contingent payments due to operational problems."

The fire at the Grosvenor mine, which occurred on June 29, has led to a reduction in Anglo's steelmaking coal production forecast. The damaged sections of the mine will be inaccessible for several months, according to the company.

Anglo American's broader restructuring plan includes the spin-off of its South African platinum unit, the closure or sale of its nickel mines, and the divestment of the De Beers diamond business, potentially completing by 2025. This plan might be adjusted if BHP renews its bid or if other suitors emerge.

Ian Woodley, portfolio manager at Old Mutual, noted, "BHP could come back after six months or wait for the Amplats separation to be completed. If I were them, I would at least wait until the separation has progressed a bit further."

Anglo American's prized assets include its premium-quality, long-lived copper mines in Latin America. Copper is highly valued in the mining sector, and investors are expected to push for clear growth plans in this area.

Erik Belz, president and chief operating officer of hedge fund Engine No. 1, said, "Having exposure to the copper sector, to the copper price, is attractive to investors. Consolidation can lower costs for our investors. If we lower costs, we can widen our margin. And if we also raise the price, we have two ways to win."