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Diamonds add sparkle to Anglo’s improving outlook

Diamond sorting in Kimberley, South Africa late 1800s. Source:

Ratings agency Moody’s on Tuesday changed its outlook for Anglo American’s credit rating recognizing the world’s fifth largest diversified miner’s “rapid progress in negotiating material asset sales, a higher than expected valuation for the sale of the niobium and phosphate businesses, and improving prospects for the global diamond market.”

In February Moody’s downgraded Anglo’s debt to junk status with a negative outlook on the London-listed company’s credit rating. Moody’s said the change positive outlook announced Tuesday follows Anglo’s announcement that it has agreed to sell its niobium and phosphates businesses for about $1.5 billion in cash and expects to close the transaction in the second part of this year after clearing standard regulatory approvals.

Moody’s sees significantly stronger rough diamond demand than at the end of 2015 as actions taken by diamond producers continue to have a positive effect

“The business generated $145 million in EBITDA in 2015 and is expected to grow in 2016. The realized valuation and planned use of proceeds to reduce debt will add to the deleveraging momentum initiated by the company’s purchase of about $1.9 billion notes for cash in March,” according to Moody’s. Before the Brazilian disposal Anglo said it was targeting $3 – $4 billion in divestment proceeds in 2016.

The company with roots going back more than a hundred years to South Africa’s gold and diamond fields said last year it would cut around 85,000 employees, almost two-thirds of its workforce. Anglo also plans to reduce the number of mines it operates from 55 to the mid-teens focusing on copper, platinum and diamonds. Moody’s said the brighter prospects for the diamond industry is “backed by the significantly stronger rough diamond demand than that observed at the end of 2015, as actions taken by diamond producers continue to have a positive effect.”

Anglo shares closed down more than 13% in London on Tuesday ahead of the announcement on a generally negative day for mining stocks. The $9.3 billion counter has more than doubled in value in 2016.

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