Glencore well-primed to make run for Anglo American after BHP rejection

Swiss resource giant Glencore is well-primed to make a run for Anglo American assets being spun off after the British multinational mining group rebuffed BHP for the second time this week.

This comes as BHP is running out of time to make a firm offer for Anglo American, with London listing rules stipulating that it has until Wednesday.

In any case, Anglo American has already said that it will essentially break itself apart by disposing of its platinum and diamonds businesses, while curtailing investment into its crop nutrient operations as a defence strategy against the BHP offer.

Although BHP is still emboldened, analysts told Business Report last week that Glencore was an almost natural fit to go after Anglo American, rocking the boat for the Australian resource giant’s pursuit. Analysts said Glencore has apparently exhibited a soft spot for South Africa and couldn't care less about what everyone else thinks.

“They might be [interested],” market analyst Simon Brown said in an interview, referring to Glencore.

Roy Topol, portfolio manager at Cratos Asset Management, said Glencore’s current exposure to South Africa was a sweetening factor.

“Yes, I think Glencore would most certainly be interested [in buying out Anglo American],” Topol said.

“They have strong ties with South Africa – the current CEO is South African, and the major shareholder and previous CEO is also South African. They already have some exposure in South Africa.”



Ultimate kicker

While BHP had proposed to spin off Kumba Iron Ore, it was likely that Glencore would be interested in Anglo’s iron ore business.

However, the ultimate kicker for its possible interest to acquire Anglo American would be the opportunities presented by the London- and Johannesburg-listed miner’s copper operations. “They might be also interested in Anglo’s iron ore in addition to the copper assets,” added Topol.

Last month, CEO Gary Nagle said Glencore’s lower year-on-year cobalt and ferrochrome volumes for the quarter to March reflected the previously announced market-related production adjustments in the Democratic Republic of the Congo (DRC) and the decision to idle the group’s Rustenburg ferrochrome smelter “in the current price” environment.

At a time concerns are rising from within South Africa’s mining industry that headwinds are worsening amid mineral output plummeting in March, he said last week that there was a silver lining to the gloom after all.

In fact, Nagle appeared convinced that it was worse elsewhere but better in South Africa in his address at a Miami conference last Wednesday, suggesting that investors could help South Africa unlock the gridlock of infrastructure inefficiencies.

“Yes, it has issues on infrastructure and power but the industry can work together to deal with that. They [South African government] have not touched royalties and taxes,” he was quoted saying at the conference by the Financial Times.