Anglo American Plc is going where larger rivals fear to tread, returning to its African roots to tap mineral assets with compelling returns.
The storied mining company, founded by Ernest Oppenheimer in Johannesburg a century ago, is devoting a third of its exploration budget to the continent, including searching for copper and cobalt in Angola and Zambia. In South Africa, it’s investing in platinum, diamond and iron-ore mines that are spitting out cash.
"The miner is devoting a third of its exploration budget to the continent."
The London-based company is betting that Africa can deliver a portfolio of new ore bodies, even as BHP Billiton and Rio Tinto Group largely shun the continent and focus on returning cash to shareholders. It’s a reversal of Anglo’s almost two-decade retreat from a continent that long weighed on its shares, but the miner retains a higher tolerance for risk in what used to be its backyard.
“They are working toward projects that can form the pipeline 30 years from now,” said Hunter Hillcoat, a London-based analyst at Investec Securities Ltd. “Anglo is the only one working there and they have better comfort within the region, geographically.”
After a collapse in commodity prices in 2015, the mining blue-chip talked about selling assets in South Africa, the home of its biggest diamond, iron ore and platinum mines. Early last year, Anglo confirmed that plan was dead. While exiting some higher-cost operations, its remaining mines in the country are the company’s biggest cash contributors.