Miningcompanies selling off good assets at the bottom of the cycle are putting their futuregrowth at risk, Brian Beamish, chairman of LonminPlc, said July 20.
Speakingduring an interview with SNL Metals & Mining, Beamish said these miners werealso doing their shareholders a disservice by hiving off quality assets at knock-downprices.
"Ifyou don't have to sell assets now, you shouldn't. It's the worst time to sell assetsright now," he said.
"Ifyou're bleeding cash, that's one thing … but if it is cash neutral and you can affordto keep it, then better times will come and the value of the entity will enhancewith time."
Beamish,who previously worked as group director of mining and technology at , declined to commenton the business strategies that have led to numerous companies selling out, amidthe worst downturn in metals prices in a generation.
Anglo,fellow London-listed rival GlencorePlc, as well as North American group Freeport-McMoRan Inc., have led the way, promising to cutdebt using funds gleaned from selling unprofitable mines.
MarkCutifani, CEO of Anglo, in February outlined plans to cut the number of Anglo's business units to 16 assets, with a focus on three "consumer"commodities — diamonds, copper and platinum. Anglo's coal, iron ore and nickelassets will eventually be sold off under the plan, as part of the executive's bidto cut US$7 billion of debt.
Cutifaniclosed the first deal in April, agreeingto sell its Brazilian niobium and phosphates units to China Molybdenum Co. Ltd. for US$1.5 billion in April. Itis still negotiating overthe sale of its Australian coal operations.
The Chinesebuyer also swooped on Freeport-McMoRan, agreeingto buy the US group's 56% effective interest in the Tenke Fungurume copper-cobalt mine in Congo forUS$2.65 billion.
Glencore,meanwhile, sold a 40%stake in its agricultural trading business for US$2.5 billion in April, and is asking US$2 billion forits Vasilkovskojegold mine in Kazakhstan.
Despitethe criticism over the long-term risks of selling these assets, the market has rewardedthe companies with strong price recoveries.
The marketbegan the year questioning Anglo's solvency. But since then, its stock price hasrisen by 157% — cashing in on a slight recovery in market prices, and investor enthusiasmon the selloff strategy.
Meanwhile,Glencore's stock rose by 95%, as pundits lauded the company's quick sales and management'sapparent ability to meet debt reduction targets.
SNL Metals & Mining is anoffering of S&P Global Market Intelligence.