Anglo American is to spin out its South African thermal coal operations into a new company that will test the appetite of London investors to own a miner dedicated to the polluting fuel.
The FTSE 100 mining group said the demerged company, Thungela Resources, was expected to start trading in June via a primary listing on the Johannesburg Stock Exchange and a standard listing in London.
Anglo American’s shareholders will receive one Thungela share for every ten Anglo shares they own. Investors reacted favourably to the news, pushing the shares up 96p, or 3.2 per cent, at £30.82, valuing the group at almost £42 billion.
Anglo American also mines copper, coking coal, iron ore and diamonds. It reported net profits of $2.1 billion last year. The group has been under increasing pressure from investors to quit producing thermal coal, which is burnt in power stations and is one of the biggest contributors to global warming.
Mark Cutifani, chief executive of Anglo American, said that “clearly some shareholders would prefer not to hold thermal coal assets” and that an interest in thermal coal would “in some cases prevent people from holding us”.
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Thermal coal generates less than 4 per cent of Anglo’s earnings before interest, taxation, depreciation and amortisation.
Analysts at Bernstein Research estimated that the thermal coal business had a net present value of $371 million. Anglo said it would provide an initial cash injection of $170 million to set Thungela up as “a sustainable standalone business” and would provide further support until the end of next year if coal prices fell below thresholds.
While other London-listed global miners, such as Glencore, have substantial thermal coal businesses there are very few dedicated thermal coal miners in London and Thungela is expected to be the biggest.
Cutifani, 62, said that “a higher proportion of UK investors were asking more questions about thermal coal” and acknowledged that some of them may ditch the new stock. He added: “That means they can buy more Anglo American shares, which would be good from an Anglo perspective, and I am sure there are shareholders out there that would love to hold Thungela shares.”
Opinion in the industry is divided over separating out coal assets, with Glencore arguing there is no environmental benefit as it simply transfers the emissions footprint to another, potentially less scrupulous, owner.
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Cutifani said that Thungela would be “a responsible steward” of the mines. He added that other shareholders were “quite keen” to own the coal assets through a dedicated company and argued that buying Thungela would “support literally billions of people who will need access to power” from coal until the energy transition is delivered.
Thungela, which means to “ignite” in Zulu, is to be led by July Ndlovu as chief executive. Ndlovu said that the coal resources “belong to the people of South Africa,” that 90,000 people depended on the industry and its responsibility was “to exploit [the resource] to the benefit of everyone, as a responsible operator”.
