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18. May 2007

Anglo's plan to focus on base metals is on track, says Carroll

By year-end Anglo American should have largely completed its overhaul to focus on the metals demanded by China's expanding economy, according to chief executive Cynthia Carroll.The world's second-largest mining company planned to concentrate on iron, copper, nickel, platinum, diamonds, coal, and zinc, Carroll said in Rio de Janeiro.

Anglo was spending $7 billion (R49 billion) on existing mines and was studying new projects worth as much as $15 billion, she added.Carroll took the helm at Anglo on March 1 as the London-based firm cut its gold, paper and steel holdings.Her predecessor, Tony Trahar, started the $10 billion selloff of non-core assets, bought back stock and narrowed the focus to base metals."We are well on the way to delivering" the restructuring by the end of the year, she said. For base metals, there was a "continued positive outlook in terms of market demand, driven primarily by China".Anglo's shares have risen 14 percent in London this year, well short of the 26 percent gains delivered by rivals Rio Tinto and BHP Billiton."We have huge organic growth potential internally," Carroll said after signing an agreement with MMX Mineracao e Metalicos to develop a $2.5 billion iron ore mine and port project in Brazil. "We haven't stated we have targeted acquisitions for growth."

It will own 49 percent of MMX Minas-Rio, an MMX project expected to produce 26.5 million tons of iron ore from 2009, according to Eike Batista, the founder and controlling shareholder of MMX.
Anglo plans to more than triple its share of the global iron ore trade to 11 percent by 2012 from 3 percent. Contract iron ore prices have tripled after five years of increases.

"There's a strengthening of the focus," said Peter Richardson, Deutsche Bank's chief metals economist. "In iron ore, there's the prospect of a longer-term bull market, and another year of higher prices.
"Copper demand from China is key. In coal, [Anglo] stands to benefit from Chinese import demand for metallurgical coal as world steel demand continues to grow."

Carroll said copper, nickel and diamonds were among the Anglo products with the best potential. Demand for industrial and gem quality diamonds might grow as much as 5 percent a year, and copper demand would "remain strong".

She said Anglo was building a $1.2 billion nickel mine in Brazil's Goias state that was expected to produce 36 000 tons a year from 2011.

Aluminium was not a priority, said Carroll, who was previously chief executive of Canada's Alcan.

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