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Why are Anglo American Shares (LON: AAL) Down?

Analyst Team trader
Updated 2 Jul 2024

Shares in mining giant Anglo American (LON: AAL) experienced a notable decline on Monday, moving in to today's session with a total drop of almost 5%. A fire outbreak at the company's Grosvenor coal mine in Queensland, Australia, over the weekend saw the share price gap down on open before settling 2.68% in the red. Followed by 2% down through this morning's session, the fire, which did not result in any injuries, poses significant challenges to the mine's immediate operations, with experts predicting an extended closure for assessment and repairs that may span several months.

The repercussions of this incident extend beyond just operational downtime. Analysts anticipate that the suspension of activities at the Grosvenor mine could introduce delays and complications in Anglo American's planned divestiture of its coal assets. These challenges may further affect the company's projected valuations of the assets up for sale.

Adding to the stakes, the Grosvenor facility is a key asset within Anglo American's portfolio, contributing around 30% to the $4.5 billion valuation that investment banking firm Jefferies estimates for the entire steelmaking coal business of the company. This valuation aligns with Anglo American's broader strategy, as the company has been looking to shed less profitable segments, particularly its coal operations. This forms part of a strategic pivot towards expanding its ventures in copper production.


YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.


The planning phase for the disposal of the coal assets has notably begun, with Anglo American's CEO, Duncan Wanblad, stating in May that the sale process was imminent. This portfolio includes five functional coal mines, several development projects, and stakeholding in joint ventures, primarily located within Australia.

In light forecasts of the recent event at Grosvenor, Anglo American has expressed that the initiation of the divestment process will be subject to review over the upcoming weeks. Nonetheless, the company also confirmed its ongoing preparatory work for the sale, signaling a commitment to advance with its strategic plans despite unexpected disruptions.

This story is developing as further details emerge regarding the extent of the fire's impact on both the Grosvenor mine and the broader divestment strategy of Anglo American. Shareholders and potential investors closely watch as adjustments and reassessments take place to adapt to the evolving situation.

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YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY

The AskTraders Analyst Team features experts in technical and fundamental analysis, as well as traders specializing in stocks, forex, and cryptocurrency.