Research archive for AGL

The big news clanging around is that Anglo American are getting a new investor, in the form of Anil Agarwal. Agarwal is the founder and chairman of Vedanta Resources, according to Wiki, he controls the business through his investment vehicle Volcan Investments. Sounds almost superhero like. He sounds like a bit of a scrapper, the Carl Icahn type, rather than a polished high society fellow, like Bill Ackman. We need all these people. He has been around for 4 decades, he has done the hard yards.

Anglo American was at the top of the leaderboards again, the stock was up a stunning 8.27 percent, following on from the nearly 15 percent gain on Friday. Michael told me yesterday (via a tweet) that short interest in the stock had risen to 18 percent. And almost all of that is recent, stunningly recent! Check it out via Markit: Most shorted ahead of earnings. I cannot believe the ruthlessness of the market, having built in an enormous amount of short interest. There is only one other stock in Europe that has a bigger short interest built in than Anglo, and that is a business called Vallourec. I suppose it is no coincidence as the market has returned to confidence mode that this company saw their share price up a whopping 16.67 percent yesterday.

Anglo American released their results on Friday. Iron Ore, predictably falling sharply, still very profitable for the group however, diamonds were an investors best friend, De Beers being the most profitable unit for the commodities company. I guess I could have used the word giant, perhaps Anglo once were the biggest and most talked about company here in South Africa, that bias definitely still exists. With a market capitalisation of 305 billion Rand, it is still a huge company by South African standards, in London the market cap is 16.69 billion Pound Sterling. It is enough to make the FTSE 100, in terms of market capitalisation however it has a weighting of about 1.1 percent. They are currently in 32nd place, BHP Billiton Plc are twice the size (add in the other Ltd. and then it is roughly four), Rio Tinto are two and three quarter times bigger, Glencore Xstrata are a little over two times bigger. The mighty, which once was a contemporary of the others and in most cases superior to the others has slipped in size and scale. Management? Bad decisions associated with management? Assets relative to their peers? Perhaps all of those things. Here is a quick snapshot of their underlying EBIT

It is not just looking more than a little sad for oil producers. Equally for the iron ore producers it has been an average time. No, not average, awful. And believe it or not, Anglo American, according to this Reuters article (which I found via a Google alert from Creamer Engineering news) -> Anglo American gets operating permit for Brazil iron ore project. See that chaps? Bought it for 5.5 billion Dollars from Eike Batista (the story calls him Brazilian billionaire Bike Batista, needs an update), sank/is sinking another 8.8 billion Dollars into the project and then saw it run around five years later than anticipated.

Anglo American have released their interim numbers to end June this morning, to view the interim presentation follow the link. Even if Anglo manage to make around the same as last year, 2.10 Dollars in earnings and pay the same dividend of 85 US cents (in a lower commodity price environment), surely there are better investment options.

We are being teed up for the Anglo American results with numbers coming through from their subsidiaries, at least trading updates released from both Kumba Iron Ore and Anglo American Platinum, Amplats in the last two days. The last two trading days that is. For Kumba Iron Ore results are expected 22 July, which is next Tuesday, HEPS and EPS are expected to be between 19.50 to 21.50 for the first half. This is against the 24.13 to 24.16 cps from the first half last year.

Quite an interesting way of going about it, the cat and mouse between government, the ruling party, the ANC and Anglo American taking place. Right now and of course over the last two decades, mining has been at the centre of our economy for a long time, Johannesburg was founded as a result of gold mining activity. A province to which nearly 13 million South Africans call home was largely unpopulated 200 odd years ago. Mzilikazi, the founder of the Matabele kingdom made these surrounds his home for a while, but the travelling boers defeated him and forced the Ndebele people north to modern day Matabeleland, a province of Zimbabwe. History is by its very nature ruthless and often tells the story of the victor.

Anglo American have delivered results for the full year to end December this morning. Talk about a stock on the tear, this is definitely one of them that has blown them all away this year. Anglo is up nearly 25 percent this year alone!!! But over three years, Anglo is down 29 percent. Over a decade the stock is, in Rand terms, not that spectacular. The ten year performance of Anglo American in London is a less impressive 11 percent return. Yes. True. Versus BHP Billiton in London the divergence comes in 2008, after the purchase by Anglo of a very expensive iron ore asset in Brazil and just before Anglo had to recapitalise Anglo Platinum. Or swap debt, I guess. BHP Billiton is up nearly 300 percent in London over the last decade. Wow. Astonishing.

Anglo American announced that they had completed the sale of Amapa to Zamin on Monday. Amapa? What is that? well, it is an iron ore project in Brazil that came with the Minas Rio purchase back in 2008. For the full release and to read about it back then, check this out from the Anglo American website: MMX Minas-Rio and MMX Amapa. Back then Anglo stated that Amapa would would be 6.5 million tons at full production, so it was always going to be a smaller part of their production. For the 2012 year they managed to squeeze out 6.1 million tons of iron ore from the operation, you might well argue that is short, but relative to some of the other production, that is fabulous.

Anglo American presented the market with production numbers on Friday, for their third quarter to end September. The shocker was the iron ore (Kumba mostly) division, down 24 percent when measured against the corresponding quarter last year. Down 16 percent when compared against the prior quarter. But year to date down only 9 percent. Sishen. Point your finger there. In the commentary these were the lines that you needed to look at: Production at Sishen mine was impacted by ongoing pit constraints and section 54 regulatory safety stoppages in August 2013. The Sishen mine pit is currently operating at a quarterly run rate of approximately 8 Mt. A plan to address the current pit constraints and a longer term operational strategy is expected to be presented by the end of the year. Wow. This certainly came from left field. Left field, the term comes from the left fielder (on a baseball field) having to throw all the way to first base. In cricket terminology this must be like trying to throw the stumps down at the bowlers end from long leg, whilst the batsmen are trying to take a quick single. A scenario that I envisage with Arjuna Ranatunga and Fanie de Villiers, you figure out which one is the batsman!

Thanks again for your feedback, we really appreciate it. This is a piece on Anglo, following our piece from yesterday, in case you missed it: Anglo American results, how good were they? Packed with useful insights about the company, and specifically what it has meant for you, if you are a shareholder. We shall call the long time reader, and even longer time investor in equity markets, nearly spanning 5 decades, Wilson. Why Wilson? Because Wilson is my most favourite character in a TV show, remember the next door neighbour in Home Improvement? The guy with the hat who would always talk to Tim the Toolman Taylor about his problems, that was Wilson. You would never see his face, but he always had the solution. Here is Wilson's response:

Anglo American reported their half year numbers on Friday, and because this used to be the South African company that everyone talked about, it still attracts more attention than most. When I was growing up, folks asked "what, do I look like an Oppenheimer?" when asked to pay a seemingly outlandish amount for something. Nowadays I guess you can substitute that with a whole host of names, Christo Wiese, Patrice Motsepe are among a couple.

This morning we have results from perhaps the most well known South African company, at least inside of our borders. The one founded by a German who worked in London. And then moved here, after getting his first job in the diamond business in London, a place called Dunkelsbuhler & Company. And the money to fund the business came in part through involvement from JP Morgan. The funders, the original shareholders you stumped up 1 million pounds were from the old world in the United Kingdom and the new world, the USA. Hence the name.

Anglo American was once the titan of the South African business landscape. As was Barloworld for that matter. Not that they are not now, but the simple truth is that they are no longer the giants that people remembered them for. Yesterday there was an announcement from Anglo American that most people expected: Anglo American confirms Minas-Rio capex and records $4 billion impairment. 4 billion Dollars after tax. Wow. We were expecting to see iron ore shipped in this half right now, that was supposed to be now. Soon. Those expectations have been dashed. Well, they were already, 13 November we already saw an update from the company, we wrote about it back then: Anglo American updates on their iron ore business.

Anglo American released their production report for the quarter and year to end December 2012 on Friday. At almost every single measure it looked like a beat too, but the suggestion was that folks had rolled their expectations lower. And no matter what your expectations are, when they are beaten that is a good thing. I did see a preview to the production report and then I saw the same analyst with commentary around the numbers. And he was surprised to the upside, which is better than being surprised with a larger bill from so and so.