Analyst Note| Mathew Hodge, CFA |
In keeping with the trend of diversified miners exiting coal, Anglo American plans to demerge its South African thermal coal operations into a new Johannesburg Stock Exchange listed vehicle, Thungela Resources. We think the demerger is a reasonable move allowing investors to choose based on their own views of carbon. However, we do not expect to change our fair value estimate once demerged. From a free cash flow and investment point of view, we see no impact to Anglo as the underlying future cash flows are unchanged, just housed in different vehicles. Coal earnings are also low and immaterial to our forecast, and the spin-off is being carried out at no debt with modest net cash.