There is growing talk that Anglo American is negotiating with a number of parties as part of efforts to cut its stake in its Brazilian iron ore unit and possibly use the proceeds to fend off an approach by Xstrata.
Anglo last week rejected a proposal from Xstrata for the two companies to merge.
Anwaar Wagner, an Old Mutual Investment Group South Africa analyst, said that given Anglo's stretched balance sheet, it made sense to sell up to half of its Brazilian iron ore business or possibly introduce a partner that would put up the capital to develop its Brazilian iron ore projects.
Wagner was not able to say how much Anglo would be able to get for selling half its Brazilian iron ore unit, but said the sale price should be as close as possible to the cost price.
Anglo bought the Minas-Rio iron ore project, 70 percent of the Amapa iron ore system and 49 percent of LLX Minas Rio for $6.65 billion (R53bn at yesterday's exchange rate).
Wagner said the sale of an interest in the Brazilian iron ore unit would allow Anglo to develop its iron ore, nickel and copper projects more quickly.
There were plenty of investors, especially in China, Japan, South Korea and the Middle East, that would be interested in taking a stake in the iron ore projects, he said.
Weekend reports suggested that Anglo was in talks with a number of parties, including Dubai Natural Resources World, Gulf Industrial Investment of Bahrain, Aluminium Corporation of China (Chinalco) and Japan-based Sojitz.
George Hudson, a London-based spokesman for Chinalco, said the aluminium group did not comment on speculation.
Anglo has estimated that it would cost $3.6bn to develop the Minas-Rio project.
Anglo spokesman James Wyatt-Tilby declined to speak about the newspaper reports, stating that the group did not comment on speculation.
Fitch Ratings yesterday said a combination of Xstrata and Anglo had the potential to create a number of benefits, including increased commodity and geographic diversification.
In another development, newspaper reports indicated that Anglo had approached former Rio Tinto chairman Jim Leng and National Grid's John Parker as candidates to replace chairman Mark Moody-Stuart.
London's Sunday Times said others on the shortlist included Thomson Reuters chairman Niall Fitzgerald and BHP Billiton director Paul Anderson.
"We are making good progress towards appointing a new chairman," Wyatt-Tilby said.
Source: Business Report, South Africa
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