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Commodity prices boost Anglo American in 2020 after Covid-19 hit

As metals prices climb.
Image: Nadine Hutton/Bloomberg

Anglo American beat forecasts with a small fall in 2020 earnings and boosted its dividend after strong commodity prices helped the diversified miner recover from coronavirus disruptions in the first half of the year.

The company’s shares were 4.5% higher in London at 1025 GMT, the second biggest gain on the benchmark FTSE 100.

Anglo was the worst hit among its peers by coronavirus lockdowns, including in countries such as South Africa and Botswana, and also had operational problems at its platinum unit.

But a rebound in commodity prices and a change in operational fortunes helped deliver its best second half since 2011.

“It was certainly a year of two halves,” Chief Executive Mark Cutifani told reporters.

Price for many metals have jumped due to tight supply and higher demand. Copper and iron ore are trading at 10-year highs, while platinum hit its highest in six years.

This has also benefitted Anglo’s larger rivals Glencore , Rio Tinto and BHP, which all beat market expectations for profits and dividends.

“Let me reassure you, whilst the fundamentals for the industry are strong, we aren’t being seduced by good prices,” Cutifani said, adding Anglo would continue to remain disciplined on costs.

The miner is, however, investing in the Quellaveco copper mine in Peru, one of the few large scale copper projects globally. First production is on track for next year.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell 2% to $9.8 billion last year, beating a forecast of $9.4 billion from nine analysts compiled by consensus platform Vuma.

Anglo declared a final dividend of 72 cents per share, in line with its 40% payout policy and up 53% from a year earlier, beating the consensus forecast.

Finance director Stephen Pierce said Anglo would consider a “special return above the base” as part of its normal six-monthly consideration of shareholder returns and if prices keep up.

Net debt at the end of December was $5.6 billion, up from $4.6 billion a year earlier, but down from $7.6 billion at the half year.

Cutifani said the miner would complete the demerger of its South African thermal coal assets within the next two years if they are spun off, currently the preferred exit route.

Bidders have approached Anglo to buy the assets, however, so a sale is still a possibility, he said, adding Anglo also expected to exit its Cerrejon coal mine in Colombia in two to three years.

“Anglo’s differentiated growth strategy is continuing to, literally, pay dividends as the group is able to benefit both from higher prices while still investing at a rate ahead of peers,” said RBC Capital Markets analyst Tyler Broda.

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