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Posts Tagged ‘expansion’

Anglo American eyes $70bln Growth Pipeline

April 27, 2011 Comments off

“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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Antofagasta on track for rapid growth

March 9, 2011 Comments off

“Chile’s Luksic family is due to receive more than $700m (£433m) this year after surging copper prices pushed Antofagasta, the mining company controlled by the family, to declare a special dividend of 100 cents.

A fivefold rise in the pay-out for 2010 offered proof of the copper market’s financial impact on the mining industry. Freeport-McMoRan, the US copper miner, also declared a 100 cents special dividend for 2010 to clear excess cash. London-listed Antofagasta ended last year in a net cash position of $1.3bn after profits nearly doubled.

The completion of a new mine and mine-expansion project allowed it to increase its production volumes at the time that sales prices for the industrial metal were ascending to this year’s highs of about $10,000 a tonne.”

Source: Financial Times, March 9 2011

Observations:

  • The strong results published by the Antofagasta are the result of a 46% price increase and an 18% production volume increase. Production for 2011 is expected to be over 30% higher. Cash unit costs increased 8%, in line with increasing costs shown by other companies.
  • LME Cash Seller Copper Price (March 2010 - March 2011)

  • In relation to the other big copper mining event of the moment: Lundin and Inmet have delayed their special shareholders meeting to vote on the proposed merger to form Symterra to March 28th to give Lundin time to study the takeover offer announced by Equinox. Equinox has not yet submitted a detailed offer.

Implications:

  • No problems have surfaced around negotiations with unions on new salary arrangements. Apparently the high copper price has helped the company to satisfy the unions demands, reducing the risk of strikes.
  • Antofagasta is increasingly looking beyond Chile’s borders for expansion: USA, Sweden, Pakistan, and Australia are mentioned in the exploration pipeline. Although all current production is in chile and the Sierra Gorda, Antocuya and Los Pelambres areas in Chile still hold potential, the company will not be able to sustain growth rates it requires to keep up with Codelco, Freeport, and the diversified miners without expanding abroad. This expansion will require significant managerial and organizational change.

©2011 | Wilfred Visser | thebusinessofmining.com

Xstrata beats expectations thanks to copper price

February 8, 2011 Comments off

Source: Xstrata FY10 Preliminary Results, February 08 2011

Observations:

  • Copper, which accounts for 61% of group EBITDA, drives the growth of the profit with its record price levels. Total revenue of $30.5bln is above estimates.
  • Earnings Per Share of 1.61 after exceptional items are on the low side of analysts estimates. However, growth prospects, including the acquisition of the majority share in Zanaga iron ore, drive stock price up 1% above natural resources comparables.

Implications:

  • Production volume is slightly higher than in past year. However, the price adjusted EBITDA for the year is down 27% because of unfavorable exchange rate and inflation. In the coming year the company will have to show it can ramp up production and benefit from the high commodity prices.
  • The 20$ct dividend (return to pre-crisis level) amounts to $586 mln, only a small part of the operational cash generation of the past year. Xstrata plans to approve a $8bln capital projects this year on top of its ambitious expansion program.

©2011 | Wilfred Visser | thebusinessofmining.com