Home > Investments > Anglo American eyes $70bln Growth Pipeline

Anglo American eyes $70bln Growth Pipeline

April 27, 2011

“Anglo American PLC currently has in the pipeline about $70 billion worth of projects that it plans to use to drive organic growth in the years ahead, senior company executives said Thursday. Cynthia Carroll, the mining company’s chief executive, said at the company’s annual general meeting here that the growth ahead is strong with ‘a new mining operation [starting] every six to nine months for the next several years.’

The company plans to increase volume output 35% by 2013 and increase 50% by 2015. It is looking to double output by 2020 based on a growth pipeline of about $70 billion of approved and unapproved projects, senior company executives said during the meeting. The company is currently developing $17 billion in projects and is looking to approve another $16 billion in the near term. A remaining $50 billion worth of projects are still waiting to be approved.”

Source: Wall Street Journal, April 21 2011

Observations:

  • Anglo American currently has 4 major growth projects nearing production: the los Bronces copper expansion project in Chile; the Barro Alto nickel project in Brazil; the Minas-Rio iron ore project in Brazil; and Kolomela iron ore project in South Africa. Furthermore the company is investing heavily in Jwaneng diamond mine in Botswana. These five projects account for $13.5bln of the approved CapEx.
  • Other approved projects are mainly in platinum, with 7 projects in Southern Africa summing up to over $3bln investment. Key unapproved projects are Quellaveco and Michiquillay copper projects in Peru; Sishen iron ore expansion in South Africa; and South African New Largo and Colombian Cerrejon thermal coal projects

Implications:

  • Anglo American currently leans heavily on its copper business (29% of profits in 2010) and iron ore business (38% of profits in 2010), mainly due to high prices. Expansion plans will mainly increase the exposure to platinum, nickel and coal, ensuring strong diversification of the company’s revenue sources.
  • Anglo American’s approved CapEx of $18bln compares to Rio Tinto’s $22bln and Xstrata’s $14bln (at time of publishing 2010 annual report). Only BHP Billiton plans to invest much more in organic growth in the coming years. However, boosted by high cash reserves growth by acquisitions would again be an option for Anglo American. With the frontier of development projects shifting to Africa, the company clearly has a favorable position to make good deals with its experience in operating projects in the continent.

©2011 | Wilfred Visser | thebusinessofmining.com

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