DBRS Comments on Anglo American’s $1.3 Billion Sale of Zinc Assets

DBRS notes that Anglo American plc (Anglo or the Company) has announced an agreement to sell its portfolio of zinc assets to Vedanta Resources plc (Vedanta) for a total consideration of $1.3 billion on an attributable, debt and cash free basis. DBRS views this as a positive development to help Anglo manage its debt levels and meet its cash needs for expansion expenditures in other areas of the business. Anglo’s credit metrics have been weakened by the downturn in commodity prices in 2009. Even though the Company has made some solid progress with its restructuring and efficiency programs, looking forward, further work remains to be done as Anglo continues to face significant project development risks and the sometimes challenging operating environment in South Africa. Accordingly, although the sale of zinc assets is considered a positive development, no rating action is contemplated upon its completion.

Anglo had previously announced its intent to exit the zinc business and this sale, if completed as indicated, will essentially complete the process. The zinc operations being sold have had volatile earnings but generated an average of approximately $380 million in EBITDA over the last five years. Anglo had approximately $11.0 billion in net debt at year-end 2009.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Mining, which can be found on our website under Methodologies.

This is a Corporate rating.