Peter Ker AFR has a piece up about AAL's manganese intentions as...

Peter Ker AFR has a piece up about AAL's manganese intentions as it breaks itself up to escape BHP's clutches. Excerpts:

Wanblad was himself caught out on detail when asked by Goldman Sachs analyst Matt Greene whether Anglo’s manganese assets would be kept alongside the prized copper, iron ore and crop nutrient mines, or divested with the coal, diamonds, platinum and nickel assets.Greene’s question had arisen because in the tome of presentations, press releases and videos that announced the break-up, manganese was not mentioned, and was seemingly forgotten.

‘‘You might be the first analyst that has asked us about manganese in the last five years,’’ said Wanblad in an exasperated tone, as if the question’s rarity made it unreasonable.‘‘As far as manganese is concerned, look, it is a great business and a great set of assets, but honestly, given the work we have been doing over the last few months, that is on the to-do list, and we haven’t quite got to the outcome of that at this point in time.’’

It was quite an admission for a chief executive to make on arguably the biggest day of his tenure, when presenting a strategy he had supposedly initiated, and was assuring everyone it was not just a reflex reaction to BHP’s takeover bid.The manganese division may have only represented 2 per cent of Anglo’s revenue last year. But it was still worth $US231 million ($344 million) of earnings before interest and tax.Anglo’s manganese business was once a joint venture with BHP, and Anglo had actually agreed to some administrative changes within the partnership

in 2015 as a gesture of good faith to assist BHP with the monumental task of divesting its bundle of non-core assets into South32.Anglo now owns 40 per cent of the manganese division while South32 owns 60 per cent; dubbed ‘‘Samancor’’, the joint venture runs the world’s best manganese mines on Groote Eylandt in the Gulf of Carpentaria, and some larger, lower-grade mines in South Africa’s Kalahari region.

While Wanblad has been too busy to think about the strategic future of the manganese division, it should be an easy call. He needs to repair the company’s balance sheet at a time when the manganese division may need investment to fix port infrastructure on Groote Eylandt, which was severely damaged by a cyclone this year.The damage has restricted exports, meaning the manganese division will likely become a drain at a time when Wanblad is seeking a cash injection by selling high-quality assets such as the Australian coal mines, which have made almost $4 billion of net profit in the past two years.

A sale of Anglo’s manganese stake to South32 should be easy to execute; the Perth-based miner is sounding optimistic about the future of manganese as its next big zinc, lead and silver mine in the US will likely come with a sizeable byproduct of manganese.

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AAL has little to say on its Mn JV as senior partner S32 is operator.

If the holding is for sale, S32 is the natural owner and only has to match the best offer in an auction. Expect studied inaction by S32.

S32 has a pot of cash from selling Illawarra coal - enough to buy out its JV partner at any time. GK & team will be considering JMS too and can afford both.

If it wants to become the Maharaja of Manganese, the opportunity is directly ahead.

Ash