The claim is that Anglo American has a subsidiary in thermal coal. Well, that’s not really a claim, that’s a fact. The claim goes on that this subsidiary is really pretty much worthless. Thermal coal is on the way out so there’s that, future prices are going to be pretty low. Also, the residual environmental costs are going to be higher than assumed. The two making that subsidiary worthless.
Well, OK. It’s a view and we’ve all got one of those. Mine would be that yes, thermal coal is on the way out but there can still be a lot of money made out of sweating assets on their way to the graveyard. Whether this is specifically true of these mines is another matter, but being in a dying business sector doesn’t in fact – inevitably at least – lead to no profit. It’s whether you can squeeze costs faster than prices come down which matters. And there is that thought that given the mania for no new investment that extant coal mines might do rather well out of the tail end of the industry.
OK, so, imagine the claim is true though. Those thermal coal assets are in fact not worth anything.
Anglo American is bundling them up and spinning them off:
Anglo American’s advisers calculated that Thungela is worth more than £500m. Stock broker Liberum expects Thungela to float for between £315m and £670m.
Sounds very sensible to me. They’re worthless. But Anglo shareholders are going to get £500 million. It’ll be £500 million for as long as it takes the market to work out they’re worthless of course but the shareholders can, possibly, cash in.
That is, Anglo appears to be doing the absolutely sensible thing. Selling something for more than it’s objectively worth. Which is, when you come to think of it, what shareholders hire those expensive managers to do for them, isn’t it?
Anglo American faces attack over ‘worthless’ coal mines
A 39-page dossier seen by The Sunday Telegraph argues that Anglo American has also overstated future coal sales and understated costs.
Flogging something for more than it’s worth. Why attack over that?
Well, OK, buyers might get a bit pissed but why are the people collecting here likely to be annoyed?