TIISETSO MOTSOENENG: Anglo Teck’s all-weather ATM, rain or shine
Anglo’s grip on Kumba is less a sentimental salute to its SA roots than keeping a reliable cash cannon in its arsenal
The logo of the Canadian mining company Teck Resources is displayed as people visit the Prospectors and Developers Association of Canada annual conference in Toronto, Ontario, Canada on March 7 2023. Picture: REUTERS/CHRIS HELGREN/FILE
The mining grapevine is buzzing about “Anglo-Teck”, the looming $50bn-plus tie-up that will turn Anglo American and Teck Resources into a copper titan. The market is eagerly digesting headlines such as “over 70% copper exposure” and “global leader in critical minerals” as if the future portfolio will be all red metal, all the time.
The logic is that hedge funds and power brokers cheer a pure play on copper, the darling of electrification. Anglo’s coal, its platinum group metals, and even its iconic De Beers diamonds are out the door or about to be. So why, critics ask, not cash out of iron ore too and banish Kumba Iron Ore, which has long been treated as an SA political and heritage relic?
Here’s why: that so-called legacy asset is the secret weapon of the whole show. For a newly supercharged, copper-heavy company, Kumba is the cash engine, hedge and stress ballast that Anglo-Tech can’t afford to lose. And ditching it would be reckless, not brave.
To begin with, behind the copper hype reality bites. Yes, demand is structurally strong, but copper remains a wildly cyclical business. Prices have whipsawed in recent years, driven by Chinese construction, trade wars and speculators riding the green transition narrative. The recent run puts copper near record highs, but even the bulls admit the price can, and will, swing.
Contrast that with iron ore. The narrative about Kumba is often stale: a legacy SA asset, a regulatory headache and a logistics drag. But the numbers look different in the 2024-25 scorecard. Kumba is a profit machine, delivering R16bn earnings before interest, taxes, depreciation and amortisation, with a margin of 46% in the first half of 2025 alone. Return on capital employed is off the charts at 48%. Its cash conversion is relentless. Free cash flow of R7.9bn pumped out a R5.3bn interest deduction, even as steel and iron prices softened.
When copper and other future metals get hit steel demand, and thus iron and cash, still keep rolling. It’s not immune to cycles, sure, but it is less spiky, especially with Kumba’s ability to command a pricing premium. The Sishen and Kolomela mines churn out premium hematite that global steelmakers snap up for its low impurities. Even when Rio Pilbara leviathans sputter or Transnet’s rail headaches bite, Kumba’s high-grade ore keeps the cash flowing. That consistency underwrites billion-rand copper projects, without Anglo-Teck having to storm the debt markets or dilute shareholders at the worst moment.
Rivals BHP and Rio Tinto treat their Pilbara behemoths in Western Australia like sovereign wealth funds, funnelling mountains of cash into greenfield copper and battery metal plays. Anglo lacks Pilbara. It has Kumba.
Here’s what investors sometimes forge: cyclical mining businesses need genuine diversification, not just by geography but by commodity. The Anglo-Tech unit, if it lives up to the press releases, will have more than 70% of its income from copper. That’s a red flag for index investments and prudent money managers alike.
Why? Consider the most recent decade of mining history. The best-run majors, including BHP and Rio Tinto, have thrived not by purifying their portfolios, but by keeping a tight band of complementary cash cows. Iron ore often runs countercyclical to copper. When Chinese construction slows, copper tanks, but government stimulus often supports infrastructure steel, and thus more ore, offering a natural hedge.
Copper and iron ore share moderate correlations, to be sure, but they diverge frequently enough for real portfolio smoothing. Removing Kumba would not be tidying up; it would be removing the new Anglo-Teck’s only major and reliable ballast against copper’s rollercoaster.
Holding on to Kumba is less about political placation than about keeping a loaded gun in the safe. As the mining world ramps up its race for critical minerals, liquidity is the real kingmaker. And in mining, where scale and timing are everything, Kumba ensures Anglo-Teck writes the cheques rather than scrounges for credit. That’s strategy, not nostalgia.
