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Anglo American has suffered a major setback over plans to sell its steelmaking coal business after one of its mines in Australia was hit by a fire, which will halt output for months.
Shares in the group fell as much as 4 per cent when the London market opened on Monday as investors digested more problems for the FTSE 100 mining group.
Anglo touted the sale of the coal business as the first of five steps to break up and transform the group as part of its takeover defence against rival BHP’s $39bn takeover bid, which collapsed in May.
Chief executive Duncan Wanblad wants to sell or spin off a number of the group’s divisions, including its De Beers diamond arm and its platinum metals group and nickel units.
But they are all expected to take longer than a sale of its coal mines.
Output at the Grosvenor coal mine in Queensland, which produces metallurgical coal, had been suspended, Anglo said in a statement. Although nobody was injured in the fire, procedures to ensure safe re-entry to the mine were expected to “take several months”, it added.
The fire, which started on Saturday and is still alight, has triggered fears among union officials that the mine may not open again.
The production halt at Grosvenor, which was expected to contribute about 20 per cent of the group’s annual forecasted steelmaking coal production, is a blow to Wanblad’s efforts to restore faith in the management team’s ability to execute and deliver on its transformation plans in the wake of BHP’s failed bid.
The group’s shares retraced some of the losses and were down 2.5 per cent to £24.44 on early Monday morning in London trade — about half the all-time high of £41.70 before Wanblad took over but above lows of £17 following a disastrous production forecast downgrade in December.
The company has been hit with three production downgrades since Wanblad took over as boss in April 2022, leading to an underperforming share price and speculation about the group’s future.
BHP, whose final bid was £31.11 per share, must wait for six months since it walked away at the end of May or a bid from a rival before it can make another approach for Anglo.
Christopher LaFemina, analyst at Jefferies, said he had believed Anglo would be able to sell the metallurgical coal assets at high valuations due to strong interest from potential buyers, estimating an overall price tag of $4.4bn.
“The latest incident at Grosvenor likely means that a sale of Grosvenor and Moranbah North (which share a coal handling facility and prep plant) will take longer than expected, and valuation will probably be lower than we had previously believed,” he said.
Shares in some companies linked with a potential bid for the Anglo coal assets rose following the production halt on an expected increase in the price of the commodity. Coronado Global Resources gained more than 9 per cent while Whitehaven Coal, which completed the purchase of two BHP coal assets, rose 6 per cent and Yancoal Australia was up 4 per cent.
The Grosvenor mine, located at Moranbah about 200km south of the Queensland city of Mackay, has had safety issues in the past.
A methane explosion in 2020, which injured five workers, led to severe criticism of Anglo’s procedures and new legislation to improve safety measures in the coal industry, which were enacted only weeks ago.
During the previous incident, Anglo said it would “work with our regulators and other stakeholders to ensure this type of incident never happens again”.