Anglo American ($AAL) reported 2.875 million tonnes of attributable saleable steelmaking coal production in the September quarter, up 53% year on year, principally as Moranbah North ramped up. Its 20 October 2026 report still targets completion of the Dhilmar disposal by the first quarter of 2027, subject to approvals. Quarterly report, steelmaking coal section.
For a business being sold, recovering production is welcome. Better operating performance could improve cash earned before completion and give the buyer a stronger starting point. Shareholders should nevertheless look carefully at what Anglo would actually receive, and when.
The 18 May agreement divides the maximum US$3.875 billion consideration into US$2.3 billion at completion and up to US$1.575 billion of price-linked earnout payments. Anglo said it intended to use the proceeds to reduce net debt. The October report updates the expected timing; it does not turn the maximum price into cash already received. Original agreement.
The earnout has to be earned
The earnout applies for five years, starting with the quarter after completion. It captures 50% of incremental revenue after royalties above agreed coal-index prices, subject to the aggregate cap. The product-specific triggers broadly align with US$259/t premium low-volatility hard coking coal, inflated annually by US CPI from completion. That is a contractual reference, not a forecast of the coal price. Agreement, footnote 1.
Approximately 41% of the maximum consideration is therefore conditional earnout value: US$1.575 billion divided by US$3.875 billion. Assigning that full amount to today's valuation would require a view on prices, production, timing and the probability of collection. Calling it worthless would also require an argument. It gives the seller participation in a favourable coal market after handing over the operations.
The structure could be sensible for both parties. A buyer avoids paying the entire headline amount before knowing whether strong prices arrive. A seller retains some upside that might otherwise be difficult to agree on in a fixed price. The economic trade-off is uncertainty about the eventual payment.
An investor can make that uncertainty visible. One case can include only the completion payment, conditional on the transaction closing. Other cases can estimate earnout receipts under clearly stated index prices and production assumptions, discounted for their timing. None should describe the maximum contractual amount as a debt reduction that has already occurred.
The coal earnings leave with the mines
A disposal can improve a balance sheet and remove an earnings stream at the same time. Keeping the expected sale cash in a valuation while retaining the sold business's future operating cash would count the benefit twice.
The comparison therefore needs a consistent transaction date. Before completion, Anglo owns the operations and faces their costs and risks. After completion, an assessment needs the remaining businesses, the actual net proceeds and any continuing obligations, with the earnout shown separately. A tax or transaction-cost estimate belongs in the calculation if supported; an unexplained deduction does not.
A more focused group could reduce borrowing and allocate capital to projects where management expects better returns. Coal investors may reach a different conclusion about the attractiveness of the assets without either side having made an obviously irrational decision. Buyers and sellers can have different funding costs, priorities and tolerances for operating risk.
The production rebound gives this debate more substance than a broad claim that nobody wants coal. It does not establish that every listed coal company is cheap. For the wider cash-value comparison, the useful work remains mine-level costs, realistic prices and the capital required to sustain output. Anglo's agreement adds a particularly clear reminder: the headline sale price needs its own valuation.