Fitch changes Anglo American's outlook to negative

Fitch Ratings-London/Johannesburg: Fitch Ratings has today changed UK-based Anglo American Plc's (Anglo) Outlook to Negative from Stable. Its ratings are affirmed at Long-term Issuer Default (IDR) and senior unsecured 'A' and Short-term IDR 'F1'. The senior unsecured rating of Anglo American Capital PLC - Anglo's guaranteed subsidiary - is also affirmed at 'A'.

The Outlook change reflects the possibility that Anglo's credit metrics may move outside Fitch's parameters for the 'A' rating during 2009, including maximum net leverage of 3.0x. This in part reflects the company's additional debt burden resulting from the acquisition of two Brazilian iron ore mines during 2008. During 2009 Fitch will continue to monitor company announcements regarding measures to preserve cash, as well as movements in commodity prices, versus its existing assumptions for the company. Deterioration in credit metrics outside the agency's current expectations is likely to result in a one-notch rating downgrade.

Fitch notes that Anglo, in common with virtually all mining companies, will record materially weaker year-on-year operating results in 2009 due to the current cyclical downturn in commodity prices. The sharp fall in commodity markets stems from the severe global recession, end-user destocking and, to some extent, financial divestment by commodity investors. For FY09 Fitch's base case assumption for Anglo includes an approximate 40% reduction in revenues across its portfolio and a greater than 50% reduction in EBITDAR levels. The agency's approach to rating companies in commodity sectors, however, specifically excludes rating to cyclical price movements, with the focus being on changes in various operational and financial parameters (production volumes, operating cost position, etc).

Fitch's modeling for FY09 includes Anglo's recent guidance that capex will be capped at a maximum of USD4.5bn while making various assumptions regarding other cash outgoings including dividends and operating costs, as well as commodity prices and exchange rates. Based on this modeling Fitch believes that Anglo is likely to record net leverage (net debt/EBITDAR) of between 2.75-3.0x in FY09. Net leverage of 3.0x would be considered to be at the upper end of the 'A' rating. Fitch believes Anglo management has responded appropriately to date in reducing FY09 capex levels with further measures likely to be announced at the time of the company's FY08 results announcement in late February.

The ratings continue to reflect Anglo's key strengths including its significant commodity and geographical diversification and a focus on long-life, low-cost mining projects. These factors will continue to benefit the company through the current cyclical downturn. Fitch also views positively the company's focus on organic growth projects, which is supported by its substantial pipeline of new development projects to replace the ongoing depletion of reserves. The ratings also reflect the agency's view that Anglo remains committed to a conservative financial profile, and that this commitment has not materially weakened over the past 2 years.

Contact: Peter Archbold, London, Tel:  +44 (0)20 7417 6334 ; Alistair Crosbie, Johannesburg,  + 27 11 516 4908 

Media Relations: Peter Fitzpatrick, London, Tel:  + 44 (0)20 7417 4364 , Email: peter.fitzpatrick@fitchratings.com.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

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