Indian mining tycoon, Anil Agarwal, announced his interest to invest in a $2.45 billion stake in Anglo American, indicating major confidence in the recovery of the global mining industry.
In 2016, the shares of Anglo American gained almost 300%, making the company the best performer on the London FTSE as the mining sector recovered from a sharp fall in commodity prices that started in 2015. And recently, the company’s shares also increased nearly 9%, outperforming the broader sector, FTNMX1770, which only increased 4%. Now, Agarwal, who has majority control of Hindustan Zinc Ltd, is planning to make a huge investment in the company through his family trust, Volcan Holdings. According to one of Agarwal’s executives, the purchase would be a passive investment and does not mean that the billionaire is seeking a board seat at the mining giant.
Because of this huge development, analyst at Jefferies, Christopher LaFemina, speculated that the industry might be making an early recovery in terms of mergers and acquisitions (M&A). Referring to improved cash flow, balance sheet recovery, and finally M&A activity, LaFemina said:
“Our expectation has been that the mining sector recovery would comprise three separate phases. It is possible that Phase 3 is beginning now.”
However, Anglo American is yet to comment on this acquisition and its tie-up with Agarwal’s Hindustan Zinc.