Mining churns out cash as Anglo boosts profit and dividend

Anglo American [JSE:AGL], the last of the big London mining companies to report annual results, held true to that theme today.

Earnings jumped in 2017 on a surge in commodity prices and the company raised its full-year dividend to $1.02 a share. Debt was cut in half to $4.5bn during the year.

“Anglo American released another good set of financial results this morning,” wrote Paul Gait, an analyst at Sanford C. Bernstein in London. “Clearly the focus has been on the impressive deleveraging, but the dividend, which was resumed earlier than expected at first-half results, is still robust.”

Rio Tinto, Glencore [JSE:GLN] and BHP Billiton [JSE:BIL] have all reported massive profits in the past month as the resurgence in global growth sent raw material prices back to multi-year highs. They have all promised higher dividends, a reward for shareholders who stuck with the companies during the commodities crisis of 2015.

Anglo shares slid 2.6% to 1 750.20 pence as of 09:40. The company’s underlying earnings came in just shy of analyst estimates, and industrial metal prices slumped in London trading. The stock is up 33% in the past year.

Among the big miners, Anglo’s rebound was one of the most impressive. It was on the brink of disaster in 2015, forcing it scrap the dividend and put mines up for sale. Now, the mines it considered selling are making the most money and Anglo is starting to consider expanding some projects.

“We believe there is significant additional upside within the business both through further operating gains and from selected organic growth options,” said CEO Mark Cutifani.

In one sign of Anglo’s newfound confidence, Cutifani said Anglo may choose to exceed its own dividend policy. Currently, the company pays out a set percentage of earnings, but may choose to go above that level in the future.

Anglo’s debt fell to $4.5bn by the end of 2017, compared with the $7bn target made at the start of the year.

Underlying earnings were $2.57 a share, compared with from $1.72 in the previous year. That compares with the  average analyst estimate of $2.60 a share.

Anglo said will target an extra $3bn to $4bn in savings by 2022 through cost reductions and better productivity.