Anglo-American has abandoned a US$555 million plan to buy a metallurgical coal project in Mozambique in the latest sign of prudence from major miners chastised by investors for excessive spending and poor acquisitions.
In what is likely to be one of the last decisions taken under outgoing CEO Cynthia Carroll, Anglo said recently, after months of talks, that conditions for the deal “have not been satisfied”. It gave no further details.
Anglo announced its maiden move into Mozambique in July last year, trumpeting a deal that would have given it a majority stake in Minas de Revuboe, a deposit sandwiched between a Vale Mine and a Rio Tinto project. It was a toehold in a region expected to become a key source of sought-after steelmaking coal.
But since then, the appetite for major projects has shrunk dramatically among miners and investors, as majors including Anglo took hefty hits on the value of boom-year deals.
As a result, the decision is unlikely to come as a major surprise to the market. It also comes two months after Rio wrote US$3 billion off the value of its own Mozambique asset, costing the CEO his job.
Rio’s troubles with a project it bought less than two years earlier were seen as a cautionary tale on big projects in new areas, just as miners come under pressure from shareholders to control spending and improve returns.
The start-up of Revuboe had already been set back to at least 2015, after delays in getting a mining licence.
Permitting delays in Brazil have added billions to the cost of Anglo’s Minas Rio iron-ore project there.
Anglo, which has long coveted an asset in Mozambique, said in its statement that it still aimed to build up a position in the south-east African country’s coal region despite pulling this deal.
Mozambique is expected to become a key source of sought-after premium, hard coking coal, used in steelmaking. It holds some of the largest untapped deposits of coking coal and is in a prime position to supply growing markets in Asia.
The majority stake in Revuboe, in Mozambique’s promising Moatize coal basin, was being sold by the estate of deceased mining magnate Ken Talbot.
Talbot, one of Australia’s richest men and founder of Macarthur Coal, died in a plane crash in Central Africa in 2010 and his estate has since been on the block. The remaining shares in Revuboe are owned by Nippon Steel and South Korean steelmaker Posco.