Something does not stack up. Big miners, lured by rising coal prices and strong Asian demand, are casting an eye over Macarthur, the Australian coking coal producer. It is already fending off a A$4.7bn bid by Peabody Energy and ArcelorMittal (which owns 16 per cent of Macarthur), but hopes for a higher offer. Anglo American’s emergence as a potential suitor is at odds with its own corporate narrative, however.

Anglo, after all, has been vocally opposed to Australia’s proposed carbon tax, suggesting that it will kill jobs and investment. Moreover, Anglo is spending hard on Latin American development projects, and its current capital expenditure cycle peaks only next year. The need for cash helps explain a light interim dividend. Also, Anglo’s cash flow is not so copious that investors clamour for it to “use it or lose it”, as they do with larger peers.

Sure, Anglo could fund a cash bid to top the A$15.50-a-share offer by Peabody/ArcelorMittal. If it bid A$18, net debt would increase by $5.2bn to $12bn, about 0.8 times consensus 2011 earnings before interest, tax, depreciation and amortisation, notes Brewin Dolphin – but, soberingly, almost two times ebitda in 2009, a weak year. In other words, the stretch of a Macarthur bid would be a mere downturn away from undoing Anglo’s balance sheet repair work. A joint bid with Citic Resources, the Chinese investor with 24 per cent of Macarthur, might be less risky.

The temptation must be great. Coking coal assets are scarce. Anglo would gain greater balance in its portfolio, currently skewed towards thermal coal. It would also lower its exposure to South Africa, behind its peer-lagging stock market rating of 6.4 times forecast 2011 earnings – although miners now talk of Australian sovereign risk. However, until Anglo has reaped the benefits of its many development projects, it should not rush to join the fray.

E-mail the Lex team in confidence at lex@ft.com

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