Anglo American will sell more assets, suspend dividends until the end of 2016 and whittle down its business divisions to three from six in the face of severe commodity price falls, the mining company said yesterday.
The overhaul of its business highlights the scale of the commodity slump’s impact on the mining sector. Anglo – the world’s fifth-biggest diversified global mining group by market value – said it would cut its assets by 60 per cent and reduce its workforce to 50,000 from 135,000, the deepest job cuts announced in the sector since the crisis began.
The London-listed company will form three divisions: De Beers for diamonds, Industrial Metals for platinum and base metals and Bulk Commodities for coal and iron ore.
It also aims to raise $4 billion (€3.6 billion) through assets sales, up from an earlier target of $3 billion, and said it would press ahead with the sale of its phosphates and niobium businesses in 2016.
“You could maybe get even over a billion for those, they’ve got higher multiples – but the question is what do you actually get paid for it today,” a banker for the mining sector said.
Anglo has suffered more than its mining peers from the commodity slump, largely due to higher-cost iron ore operations than its larger competitors BHP Billiton and Rio Tinto. The company – which also plans to sell some coal assets in Australia and South Africa and close loss-making mines – said it had secured $2 billion in assets sales so far.
“While we have continued to deliver our business restructuring and performance objectives across the board, the severity of commodity price deterioration requires bolder action,” chief executive officer Mark Cutifani said.
The group’s share price, however, was down 8.3 per cent by 1205 GMT after Anglo also suspended dividends for the remainder of 2015 and in 2016 and investors viewed the company’s plans as only a short-term solution.
The shares have plunged 70 per cent this year as investors worried about the slow pace of turnaround efforts launched by Cutifani in 2013.
Anglo plans to mainly focus on its diamond, platinum and copper businesses which offer better long-term potential, Cutifani told investors at a presentation in London.
“Assets in nickel, coal and iron ore will have to compete and demonstrate their ability to drive down the cost curve, with the ability to deliver cash through the cycle. If not, they won’t be in the portfolio, it’s assimple as that,” Cutifani said.
He said the company would give more details on its future portfolio in February, when it is due to release its annual results.
“With net debt still high relative to the current market cap, this looks like a survival plan for the next two years,” SP Angel analysts said in a note.