CAPE TOWN (Business Day) -- With Anglo American's [Nasdaq:AAUK] gearing now at the bottom end of its target range, analysts question if the group might consider reorganising its capital base, possibly through a share buyback programme.
The group's net debt to total capital had fallen to 21.1% at the end of June, from 22.9% at the end of December, and it has reduced its net debt by $1.2 billion over the past year.
CE Tony Trahar says Anglo has a range of options for its cash. It could look at more acquisitions, and it has a strong pipeline of new projects. It would also look at capital optimisation, which could include share buybacks.
One of the factors that has added to Anglo's growing cash pile has been generous dividends paid recently by its subsidiaries.
An analyst says Tongaat-Hulett [LSE:THL] and AngloGold Ashanti [NYSE:AU] have made large dividend payments, and Kumba and Highveld [Nasdaq:HSVLY] have declared special dividends.
Does that mean Anglo is squeezing subsidiaries for dividends? Are the rands locked into SA, and how they will be used?
Trahar says the dividends declared by those companies reflect their good results and Anglo's desire to see them operate at a proper level of gearing.
Some of them have held back on paying dividends while undertaking capital expansion programmes or, in the case of Tongaat-Hulett and the sugar industry, during a cyclical downturn.
Now they are recovering strongly and generating cash, which it is thought should be returned to shareholders. But whether the dividends are remittable outside SA depends on individual companies, says Trahar.
