Anglo American agrees $1.5 billion sale of Brazilian niobium, phosphates units

LONDON (Reuters) - Anglo American AAL.L has agreed to sell its niobium and phosphates businesses in Brazil to China Molybdenum for $1.5 billion in cash, it said on Thursday, as it seeks to cut debt in a radical restructuring of the global mining group.

People walk past a board outside the Anglo American offices in Johannesburg January 8, 2013. REUTERS/Siphiwe Sibeko

Anglo American shares rose more than 3 percent in early trade as analysts said the price was higher than expected and boded well for further deals.

“The proceeds from this transaction ... will enable us to continue to reduce our net debt towards our targeted level of less than $10 billion at the end of 2016,” said Anglo’s chief executive, Mark Cutifani.

The niobium and phosphates businesses consist of mines, plants, processing facilities, chemical complexes and deposits, with niobium a key ingredient of specialist high-strength steels while phosphate production serves Brazil’s domestic market for fertilisers.

Analysts said the sale was around $500 million above expectations following reports of interest from other firms, including Apollo Global Management LLC APO.N and Vale. VALE5.SA

Bernstein said in a note the deal should give investors confidence that Anglo can realize good value for its assets and marked a shift in strategy.

“Anglo American is dressing itself up as an attractive takeover target,” it said.

The group is selling parts of its business after a commodities rout that has triggered a fight for survival even among heavyweight miners.

As it aims to cut its net debt to less than $10 billion by the end of the year from $12.9 billion at the end of December, the ratio under scrutiny is net debt to earnings before interest, tax, depreciation and amortization.

BMO Capital Markets that ratio should shrink to less than three from a previous projection of 3.3.

On first analysis it said the deal could reduce Anglo Amercian’s debt sufficiently for it to regain an investment grade credit rating following its downgrade to junk by credit ratings agencies.

The deal is subject to certain approvals and is expected to close in the second half of the year.

Anglo American shares were up 2 percent at 711.8 pence by 0915 GMT, when the FTSE 350 mining sector index <0#.FTNMX1770> was up 0.7 percent.

Additional reporting by Sarah Young; Editing by Susan Fenton, Greg Mahlich