Tags: Anglo | American | mining | AAUKY

Anglo American Mining Emerging Markets

By Dan Weil   |   Wednesday, 29 Feb 2012 02:50 PM

Anglo American (AAUKY), a diversified producer of metals and minerals around the globe, now represents a play on emerging markets. That’s because the bulk of demand for those mining commodities today comes from countries such as China, Brazil, and India.

Anglo American certainly has thrived recently. Its shares produced an annualized total return of 35.5 percent over the last three years, compared to 31.8 percent for Morningstar’s average of industrial metals and minerals stocks.

Anglo American was founded by legendary South African industrialist Ernest Oppenheimer in 1917. It was originally based in Johannesburg but now has its headquarters in London.

The company owns about 77 percent of Anglo American Platinum, the biggest platinum miner in the world, accounting for about 40 percent of global output.

Anglo also controls 45 percent of De Beers, the world’s largest diamond producer. Anglo has offered $5.1 billion to increase that stake to as high as 85 percent.

The company’s main revenue generators are platinum, copper, iron ore, and coal. Each of those commodities contributes about 20 percent of Anglo's sales, leaving out businesses the company plans to sell, according to Morningstar.

Streamlining


The company has unloaded non-core assets such as sugar and paper operations over the past few years. The sale of its Scaw steel business in South Africa this year may represent the end of that process, company CEO Cynthia Carroll said in a recent conference call with reporters.

Anglo has made these changes to increase its emphasis on emerging markets. It’s difficult to argue with this strategy. But remember, emerging markets aren’t immune from the business cycle themselves, as witnessed by recent slowdowns in China and Brazil.

Of three analysts tracked by Thomson/First Call, one rates Anglo shares a strong buy, one a buy, and one a hold.

In 2011, Anglo’s underlying earnings, which exclude special items, jumped 23 percent to $6.1 billion. Revenue gained 11 percent to $36.5 billion.

The company next reports earnings Aug. 17.

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