A big headline has hit news on Wednesday morning involving Anglo American PLC (LON:AAL).
The blue chip miner has said that it in advanced talks to acquire London listed Sirius Minerals PLC (LON:SXX). In the Wednesday update, the Anglo have reportedly offered 5.5p per share for Sirius, giving a total valuation at £386 million.
The offer that has been put on the table represents a 34% premium to the closing share price of Sirius on Tuesday.
Sirius said that they would be conducting a strategic review of its business back in September, and the offer today may be too tempting to resist.
The strategic review conducted by Sirius outlined the development plan for a project in North Yorkshire, as the firm looked at their funding options.
Sirius also noted that they were on the search for a partner firm to sustain this project and henceforth Sirius said they will slow the development of its polyhalite mine.
Anglo American have promised to provide stability and certainty to Sirius shareholders, as the mining giant titan could bring “financial, technical and marketing resources and capabilities to progress the project over time.”
Comments
Anglo American said: “Anglo American identified the project as being of potential interest some time ago, given the quality of the underlying asset in terms of scale, resource life, operating cost profile and the nature and quality of its product.
“The project has the potential to fit well with Anglo American’s established strategy of focusing on world-class assets, particularly in the context of Anglo American’s portfolio trajectory towards later cycle products that support a fast-growing global population and a cleaner, greener, more sustainable world.”
Anglo American concluded: “At this stage, the project requires a significant amount of further financing to develop and commission the operation that has proven challenging for Sirius to procure on an economic basis. Anglo American, as one of the world’s leading mining companies, has the resources and capabilities to help build on the achievements of the Sirius team.”
Strong start to 2020 for Anglo American
Anglo American saw a relatively positive 2019, although there were bumps along the way.
In January 2019 the firm saw its annual output increase by 7%. Da Beers production increased by 12% to 9.1 million caratas and driven by production increases at Orapa. Additionally, copper production increased by 23% to 183,000 tonnes. Increases occurred across all operations and reflect a strong operational performance.
The optimism continued, as the firm said it was broadly on track to meet its annual targets in July.
For the company’s second quarter ended 30 June, copper production was up 1% to 159,100 tonnes driven by a strong performance at Los Bronces and Collahuasi.
De Beers’ diamond production dropped by 14% to 7.7 million carats as Anglo American continues to produce to market demand and Venetia transitions from open pit to underground.
Platinum production increased by 3% to 520,300 ounces and palladium decreased by 1% to 347,200 ounces, due to a change in mix of production from each operation.
“Production is up 2% for the quarter, due to the successful ramp-up at Minas-Rio and strong performance at Metallurgical Coal following the longwall moves and plant upgrade work in Q1,” Mark Cutifani, Chief Executive of Anglo American, commented in the results.
However bumps were seen in December, when the firm lowered its 2020 output guidance.
Anglo American’s copper production guidance for 2020 has been cut to 620,000 tonnes to 670,000 tonnes, with the upper limit of the range previously 680,000 tonnes.
Diamond output guidance for 2020 fallen to between 32,000 carats and 34,000 carats, from 33,000 to 35,000 carats before.
Additionally, Iron ore production guidance from Kumba Iron Ore Ltd (JSE:KIO) in South Africa has been fallen to between 42 million to 43 million tonnes from 43 million to 44 million before. This guidance, and the change, applies to 2021 and 2022 as well.
Anglo American has lowered metallurgical coal guidance for 2020 to between 21 million and 23 million tonnes, from between 22 million and 24 million tonnes a year ago.
Finally, platinum guidance has stayed consistent at 2 million to 2.2 million ounces for 2020, 2021, and 2022, with palladium seen at 1.4 million ounces for 2020 from 1.3 million to 1.4 million ounces before.
It seems that the deal could have benefits for both companies, however both firms have emphasized that there is no concrete certainty that any offer will be made.