Anglo American windfall cheers City

Two months ago, mining heavyweight Anglo American began a mammoth mission to cut its portfolio by two-thirds to shore up the balance sheet and create a profitable business throughout the commodity cycle. It's why an agreement to sell its niobium and phosphates business in Brazil for $1.5 billion (£1.5 billion) has been so well-received. It's Anglo's largest sale to date and means nearly half of its ambitious disposals target for all of 2016 is already in the bag.

Used in steel production, the niobium mine is one of the top three in the world, so this is a canny move by Chinese buyer China Molybdenum. But Anglo needs the cash to help reduce debt to less than $10 billion this year from the $12.9 billion reported at the end of 2015.

Located in Goiás and São Paulo, the phosphates and niobium businesses generated $146 million cash profit in the year to 31 December, with pre-tax profit of $69 million. China Molybdenum will get a mine, three processing facilities, two non-operating mines, two mineral deposits and international sales and marketing operations with the Niobium division. Over 1,400 tonnes of Niobium was produced in the first quarter of 2016, with 6,300 tonnes mined in 2015.

The phosphates business comes with a mine, beneficiation plant, two chemical complexes and two further mineral deposits. In 2015, Anglo produced 1.3 million tonnes of concentrate 1.1 million tonnes of fertiliser, 0.3 million of phosphoric acid and 0.1 million tonnes of dicalcium phosphate (DCP).

The "For Sale" sign went up on Anglo's niobium and phosphates business last year as the miner struggled to cope with collapsing commodity prices. It wanted to raise an extra $3-4 billion by slashing its portfolio of 45 assets to just 16. In 2013, Anglo had 63 assets.

The disposal programme raised $2.1 billion in 2015, which was dwarfed by the $3.8 billion of impairments triggered in the second half alone. Pre-tax losses plunged to $5.5 billion.

With its eye set firmly on delivering profitability and cash flows throughout the commodity cycle, Anglo reckons a focus on diamonds, copper, and platinum group metals is the way to go. Its Kumba iron ore play and coal mines will go for the right price.

"The disposal will serve to cut debt and bolster the embattled miner's balance sheet, much to investor glee, leaving it in a much stronger and leaner position both operationally and financially," reckons Mike van Dulken, head of research at Accendo Markets.

Shooting nearly 5% higher straight out of the blocks, Anglo's shares reached 729p in early deals. It's more than tripled in value since January, driven by improved metal prices on greater optimism around China.

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