Anglo American to sell Brazilian units to China Molybdenum for $1.5 billion

Beleaguered Anglo American (LON:ALL) said Thursday it has reached a deal to sell its niobium and phosphates businesses in Brazil to China Molybdenum Co. Ltd for $1.5 billion in cash, as part of its ongoing drive to offload noncore assets to reduce debt.

The niobium and phosphates division, which consists of mines, plants, processing facilities, chemical complexes and deposits, was considered one of Anglo’s more profitable businesses, although a modest contributor to the group’s overall profitability.

The niobium and phosphates division, which consists of mines, plants, processing facilities, chemical complexes and deposits, was one of Anglo’s more profitable businesses.

Together, the businesses generated earnings before interest and taxes of $119 million last year, or 5% of the group’s total of $2.2 billion. They could have turned Anglo into the world’s second-largest producer of niobium, a material used in high-temperature alloys for jet engines and lightweight steel for cars.

Despite potential, CEO Mark Cutifani listed the unit as one of the many the firm was seeking to offload as part of a major restructuring plans, detailed in February. Anglo American said then it would sell more than half of its mines to focus on a smaller group of operations that can turn a profit even in during commodities downturn.

The assets attracted interest from other miners including US fertilizer group Mosaic (NYSE:MOS), mining scene newcomer South32 (ASX, LON, JSE:S32), Switzerland's Eurochem and iron ore and nickel giant Vale SA (NYSE:VALE).

"The proceeds from this transaction … will enable us to continue to reduce our net debt towards our targeted level of less than $10 billion at the end of 2016," Cutifani said in a statement.

The deal is conditional upon regulatory approval from China, but Anglo said it had commitments from holders of 63% of the Chinese group’s shares to support the transaction, expected to close in the second half of this year.

Anglo American’s shares tumbled about 70% last year, making it the worst performer out of the U.K.’s blue chip FTSE 100 index.

But the stock has experienced an amazing recovery in 2016, climbing almost 142% and it was trading more than 4% up on Thursday afternoon to 727p. It still remains around 75% below its 2008 peak.