Anglo American loses some steel

Anglo American (AAL-L) is selling its 79% stake in South African steelmaker Highveld (HVLJ-J) for US$678 million to Russian steelmaker Evraz (EVR-L).

Anglo has closed a deal to sell roughly 25% of its stake to Evraz and another 25% to Swiss banking group Credit Suisse.

But Evraz is currently seeking regulatory approval to exercise an option to buy Anglo’s remaining 29.2% stake in Highveld and also the 24.9% that Credit Suisse has taken.

Should Evraz increase its interest beyond 35%, it will be obliged to make an offer to all shareholders of Highveld.

Anglo American will retain the voting rights in respect of the shares acquired by Credit Suisse and Anglo American will retain representatives on the Highveld board until it gets rid of all of its Highveld shares.

In a statement Evraz says the deal shows the Russian company has “great confidence” in the South African steel industry. It says its investment was driven by the strong demand for steel in the country due to an upswing in new mining, infrastructure and industrial projects.

Evraz also pointed Highveld’s internal growth plans for both its vanadium and steel businesses specifically its expansion plan which is targeting an increase in steel output of more than 20% — as a reason for its bullishness on the company.

Evraz says it is committed to advancing black economic empowerment at Highveld.

Tony Trahar, chief executive of Anglo American, says in a statement that the deal will “ensure that Highveld remains an efficient competitor in the South African and global markets.”

The move by Anglo comes some ten months after the company announced that it would divest itself of its steel interests.

The announcement was made as part of its new corporate strategy – the central thrust of which is to simplify its portfolio so it can focus on its mining operations.

Highveld Steel and Vanadium is a leading vanadium producer and also produces steel, ferroalloys, and carbonaceous products.

Anglo American is one of the world’s largest mining and natural resource groups. It is a leader in platinum group metals, gold and diamonds, with significant interests in coal, base and ferrous metals, industrial minerals and paper and packaging.

The company has operations in Africa, Europe, South and North America, Australia and Asia.

Evraz is one of the world’s largest vertically integrated steel and miningbusinesses with operations in Russia, Italy and the Czech Republic. The company produced roughly 14 million tonnes of crude steel last year.