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Moody's moves to 'positive' outlook on Anglo debt after US$1.5B Brazil asset sale

Moody's said May 3 that it changed its outlook on the debt ofAnglo American Plc, topositive from negative, following the mining group's deal to off-load its niobium and phosphates business in Brazilto China Molybdenum Co. Ltd.for US$1.5 billion.

The rating agency said the reassessment of Anglo's credit worthinesswas brought about by the unexpectedly high valuation achieved on the niobium andphosphates business, as well as the improving prospects for the diamond market —one of the miner's core business units.

Moody's held its corporate family rating of Anglo steady at Ba3,but changed the outlook to positive to reflect the company's steps toward reducingits debt.

Investors and analysts have been watching Anglo American closelyfor signs that CEO Mark Cutifani is serious about his pledge to cut debt from aboutUS$13 billion at the end of last year to US$6 billion over the next few years. Ata briefing earlier this year,he set a target of realizing US$4 billion in asset sales in 2016 alone, with theproceeds to go toward debt reduction.

According to Moody's, Anglo's deal with China Molybdenum hasreassured investors that the company can achieve its target.

"As Anglo American continues to downsize its operations, we expect theexecution of divestments to become one of the main drivers of deleveraging. Whilefuture divestments are not factored into the rating, we will continue to assesstheir credit impact as transactions are executed," Elena Nadtotchi, Moody'slead analyst on Anglo American was quoted as saying.

According to Nadtotchi, Moody's change in its outlook for the companyreflected the "potential for an upgrade if the company deleverages substantiallyfaster than expected."

Meanwhile, news from Anglo's De Beers diamond unit has been positivelately. De Beers saidit sold US$660 million in diamonds at its most recent auction April 11, up fromUS$610 million in February.

The Moody's report also pointed out that Anglo still held US$6.9 billionin cash as of December 2015, with a further US$7.9 billion available under creditfacilities.