[miningmx.com] — ANGLO American CEO Cynthia Carroll faced questions on Friday over the group’s seemingly conservative dividend policy, with some investors urging the diversified miner to return to its former ways of liberal dividend payments.
The company declared a 28 US cents interim dividend policy earlier in the day, up 12% from last year, on the back of posting a 38% increase in operating profit to $6bn and underlying earnings of $3.1bn, having succeeded in cashing in on record commodities prices.
The interim dividend followed a final and total dividend of 40c and 65c respectively for 2010.
Prior to this, the last time Anglo paid a final dividend was at the end of its 2007 financial year, when shareholders were paid-out 86c for every share (a total dividend of 124c for the year). The fallout of the economic crisis forced the group to suspend payments until the interim stage in 2010.
Announcing 2010’s final dividend earlier this year, Carroll said the company had adopted a progressive dividend policy where every previous payment would serve as a base to be maintained or increased, at the discretion of the board.
Anglo indicated it was prioritising its cash to fund the group’s project investment programme, with $6bn capex earmarked for this year and $6.5bn for 2012. “The year after that will have a similar sort of run rate,’ Carroll said.
Three of Anglo’s four major growth projects – Barro Alto (nickel), Los Bronces (copper) and Kolomela (iron ore) – would be in production within six months, with the company having a $66bn pipeline of unapproved projects. The remaining growth project, Minas Rio (iron ore), is due to commence operations in 2013.
During the question and answer session which followed Friday’s result presentation, Liam Fitzpatrick of Credit Suisse asked Carroll whether Anglo would free up some cash to investors once the four major growth projects stood on their own feet, or whether those cash flows would be channelled towards new projects.
“We’ve got a massive project pipeline,’ Carroll responded. “Thank heavens we didn’t stop to expand a few years ago when many of our peers did. We will continue to invest.’
She said the four growth projects alone would contribute $6bn to EBITDA at current commodity prices.
“As we go forward and look at the dynamics of the market, we will make a determination as to how much and to what extent we will raise dividends.’
Asked by Tim Clark of Deutsche Bank whether increases in production or other benchmarks would be used as a yardstick for dividends, Carroll remained non-committal.
“As I’ve said earlier, we have a progressive dividend policy and that means it is either maintained or increased through the cycle.’
Said Louis Venter of Anglorand Securities: “Ms Carroll, you’ve done extremely well and we appreciate that. The only problem is the shareholders; we’re losing money and we can’t really talk of an income.
“Can’t you grow a bit slower and give us a bigger bite of the cherry?’
To which Carroll responded: “We’ll leave it at that.’
