Fitch Ratings has affirmed Anglo American Plc's Long-Term Issuer Default Rating (IDR) at 'BBB+' with a Stable Outlook.
The affirmation reflects Anglo American's strong post-restructuring portfolio of iron ore and copper assets with solid longer-term prospects and a pipeline of growth options and Fitch's expectations of a strong financial profile, which offset partial loss of scale and assets diversification based on the announced restructuring strategy. We forecast a modest reduction in EBITDA net leverage to around 1.0-1.2x over 2025-2027 from 1.3x in 2023 as proceeds from disposals will be deployed for debt repayments. The rating also incorporates the company's focus on disciplined capital allocation and cost savings.
Final details regarding de-mergers and disposals remain uncertain and there is a degree of execution risk, but we assume that Anglo American will successfully deliver its transformation plan within 18-24 months, while maintaining a conservative financial profile.
Key Rating Drivers
Restructuring Announced: BHP Group Limited's bid to acquire a majority of Anglo American has accelerated the latter's announcement of a new strategy. This strategy assumes the sale of metallurgical coal assets, the sale or demerger of the De Beers diamond business, the demerger of platinum group metals (PGM) assets (Amplats) in South Africa and divestment or care and maintenance of nickel assets. The plan is expected to be executed within 18-24 months and includes changes to the capex profile as well as additional cost savings.
In Fitch's view, there could be execution risks for the timeline for this significant business transformation. However, the company has a record of successful sale of thermal coal assets in 2018, demerger of thermal coal Thungela assets in South Africa in 2021, and the partial sale of its stake in Quellaveco copper asset in Peru.
Disposals and Debt Reduction: Fitch's rating case assumes the full disposal of stakes in metallurgical coal and De Beers in 2025, for a total USD8 billion, and the demerger of Amplats. We expect proceeds from these disposals to be used for near to medium term debt repayments, which will materially reduce debt and modestly lower EBITDA net leverage to around 1.0-1.2x in 2025-2026 (1.3x in 2023).
Financial Policy Unchanged: The company has maintained its dividend policy with a minimum payout of 40% of underlying earnings, and net debt to EBITDA at 1.5x at the bottom of the cycle. We expect Anglo American to take mitigating actions if leverage starts trending towards 1.5x. Uncertainties remain over De Beers' final divestment structure, but we assume that Anglo American will remain committed to deleveraging. We will assess the impact of other options versus full disposal once final terms are announced.
Smaller Scale, Stronger Margins: Anglo American will lose approximately one-third of its EBITDA post-restructuring. However, we expect the stronger economics of copper and iron ore assets versus PGMs and diamonds, along with additional cost-cutting plans of USD0.8 billion, will improve Fitch-adjusted EBITDA margins to the mid-40s compared with the low-30s currently. We also expect stronger profits coupled with lower investments to result in positive free cash flow (FCF) generation from 2026, despite a reduction in copper and iron ore prices toward mid-cycle levels.
Portfolio Diversification Reduced: Successful strategy execution will transform Anglo American into a copper and iron ore miner with reduced benefits from diversification into PGMs, metallurgical coal, diamonds and nickel. Fitch expects Anglo American to benefit from a simplified structure and focus on growth within its remaining balanced portfolio with solid longer-term prospects.
Fitch forecasts an EBITDA split of around 60% from copper and 40% from iron ore at mid-cycle prices, which we believe will position the company favourably versus its peers with largely copper or iron ore exposure. In the longer term, diversification could improve with contributions from polyhalite fertiliser project Woodsmith, where final investment decision will be contingent on its successful syndication.
Lower Capex Profile: Anglo American's capex adjustment following the restructuring and rephasing of capex on Woodsmith, will significantly lower its capex profile. Adjusting for Woodsmith re-phasing and planned deconsolidation of metallurgical coal, De Beers and Amplats we assume cumulative capex of around USD11 billion over 2024-2026 (USD17 billion previously).
Growth Projects: In addition to Woodsmith, Anglo American maintains a number of medium-term brownfield growth options. In copper, the company is working towards a pathway to achieving over 1 million tonnes by the mid-2030s through a 175kt expansion of production at Collahuasi by 2032, growth of Los Bronces 100-150kt by early 2030s, and 100ktpa of copper equivalent from the Sakatti project in Finland around 2033. In iron ore, the company's acquisition of the Serpentina resource base adjacent to Minas-Rio opens the potential for new development projects in the premium high-grade market.
Evolving Operating Environment: Anglo American will simplify its business in South Africa (retaining only its Kumba iron ore assets), where the operating environment has worsened in recent years due to unstable energy supply, logistical constraints. Despite the eventual exit from stable jurisdictions like Australia and Botswana, Fitch expects the proportion of mid-cycle earnings from other investment-grade jurisdictions (Peru: BBB/Negative and Chile: A-/Stable) of the restructured Anglo American will remain broadly similar at around 60% of the total, while exposure to Brazil will be incrementally higher (15-20%).
Country Ceiling Not a Constraint: Earnings from creditworthy jurisdictions with higher Country Ceilings such as Chile (A+) or Peru (A-) will comfortably safeguard hard-currency interest service post-restructuring, and the group has access to adequate liquidity from reputable international banks, meaning the lower Country Ceilings of South Africa (BB) and Brazil (BB+) do not limit Anglo American's rating.
Derivation Summary
Anglo American's restructuring will further reduce scale compared to BHP Group Limited (A/Stable) and Rio Tinto Plc (A/Stable) although it will maintain a solid scale of operations and its EBITDA margins are expected to improve to mid-40's and be comparable with both global mining companies.
BHP derives an estimated two-thirds of mid-cycle EBITDA from steelmaking raw materials (mainly iron ore, but also metallurgical coal) and over one-third from copper, while Rio Tinto has higher exposure to one single commodity, with iron ore accounting for around 70% of mid-cycle EBITDA, and the remainder primarily from aluminium and copper. Both BHP and Rio Tinto derive a large majority of earnings from assets in OECD countries.
Southern Copper Corporation (SCC; BBB+/Stable) is comparable in size with exposure focused on copper. SCC has a leading cost position with assets located in the first quartile of cost curve and its operations are concentrated in Mexico (BBB-/Stable) and Peru while Anglo American's copper assets are placed between first and third quartile and are located in Peru and Chile. Anglo American benefits from diversification into iron ore but its iron ore operations are located in lower rated jurisdictions such as Brazil (BB/Stable) and South Africa (BB-/Stable).
Antofagasta PLC (BBB+/Stable) is a smaller copper miner with assets concentrated in Chile and competitively positioned in the second quartile of the cost curve. The company has a record of conservative financial profile and its ongoing investment programme has a limited impact on leverage due to support from the main shareholder.
Freeport-McMoRan Inc (BBB/Stable) generates approximately 75% of revenue from copper with balance from gold and molybdenum and its assets are diversified between the United States of America (AA+/Stable), Chile, Peru and Indonesia (BBB/Stable). Anglo American has on average lower cost assets but its scale at mid-cycle prices is expected to be moderately smaller than Freeport's.
Key Assumptions
Copper, iron ore, hard coking coal and PGM prices in line with Fitch's commodity price assumptions.
Divestment proceeds from sale of steelmaking coal business and De Beers totalling USD8 billion in 2025
Demerger of Amplats to be completed by end 2025
Pro-forma capex of USD5.5 billion in 2024, USD4.0 billion in 2025 and USD1.8 billion in 2026
Dividends at 40% of net income (reported underlying earnings), no change in policy expected
RATING SENSITIVITIES
We have rebased the negative leverage sensitivities to reflect peer comparison following the planned transformation and in line with our criteria.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
An upgrade is unlikely in the short to medium term due to reduced scale and diversification
EBITDA gross leverage remaining below 1.0x on a sustained basis
EBITDA net leverage below 0.5x on a sustained basis
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
EBITDA gross leverage remaining above 1.8x on a sustained basis
EBITDA net leverage remaining above 1.3x on a sustained basis
EBITDA margin below 35% on a sustained basis
Unsuccessful execution of restructuring plan or material deviation from Fitch's assumption related to de-leverage of the business upon process completion.
Liquidity and Debt Structure
Strong Liquidity: Anglo American's liquidity remains comfortable, with USD5.6 billion of unrestricted, readily available cash as at December 2023, and undrawn committed borrowing facilities of USD5.1 billion (with maturities of at least two years from end-2023). This provides the company with a cash buffer to comfortably withstand Fitch-projected negative FCF over the next two years and cover short-term maturities.
In 2H23, Anglo American refinanced its USD4.7 billion revolving credit facility maturing in March 2025, to a one-year USD1.0 billion facility maturing in November 2024, and a USD3.7 billion five-year facility maturing in November 2028. We expect Anglo American to maintain solid liquidity post-restructuring.
Issuer Profile
Anglo American is one of the world's top mining companies, with significant commodity and geographical diversification.
Upon completion of its restructuring, Anglo American will have less commodity diversification but will remain a major copper and iron ore (top 5/6) producer, with a prospective project in multi-nutrient fertiliser. Geographical diversification will also decline, with operations focusing on Peru, Chile, South Africa and Brazil.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Click here to access Fitch's latest quarterly Global Corporates Macro and Sector Forecasts data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
ANGLO AMERICAN PLC 
