South32 in talks with Anglo American to buy manganese unit

Mining scene newcomer and BHP spin-off South32 (ASX, LON, JSE:S32) may soon make an offer for Anglo American’s (LON:AAL) stake in their manganese joint venture, if the price was right.

South32 indicated negotiations had already started. "We have a good relationship with our joint venture partner and they’ve communicated their intentions," the company said in a statement sent to Reuters.

Samancor, run by South32, is the world’s largest producer of manganese, used in stainless steel. The joint venture operates in Australia and South Africa, where its assets include the Hotazel mine, which holds one of the world’s largest deposits of manganese.

South32 inherited BHP Billiton's 60% in the Samancor joint venture, and Anglo American owns the rest.

South32 inherited BHP Billiton's 60% in Samancor, with Anglo owning the rest of the business. But the unit has not borne the expected fruits. Samancor slumped to a $54 million underlying loss in 2015, according to Anglo, and earlier this month South32 announced 620 jobs would go at the joint venture, while Hotazel would cut back production in an effort to shore up prices.

Anglo is seeking to raise about $4 billion from selling mines as it races to trim its $12.9 billion of debt amid collapsing prices of raw materials and focuses its portfolio on a smaller number of assets producing diamonds, platinum and copper

Analysts have questioned whether Anglo, which posted a jaw-dropping $5.6 billion full-year loss in 2015 earlier this week, will raise as much money as it hopes from its disposals. Credit ratings agency Standard & Poor’s cut the company’s rating to junk on Tursday, following similar moves by peers Fitch and Moody’s.

Eyes in Brazil too

South32 CEO Graham Kerr has said the company is open to making value-adding acquisitions despite current market conditions.

Last month, there were rumours that the Perth-based company also wants to buy Anglo’s $1 billion niobium and phosphate business in Brazil.

The diversified miner, created last year in the mining sector’s biggest spinoff in about a decade, holds bauxite and alumina assets in Australia and Brazil and owns aluminum smelters in South Africa and Mozambique. Other assets include manganese, coal, nickel, silver, lead and zinc in SA, Australia and South America.