Anglo American’s overhaul reflects the dire straits the global mining industry is in these days. (Image: Screenshot from Anglo American video via YouTube)
After weeks of speculation, battered mining giant Anglo American (LON:AAL) has finally revealed details of its radical “portfolio restructuring,”announced in December, in response to a global rout in commodity prices that punished the costly mines the company operates around the world.
Anglo’s plans, unveiled at the same time it posted a jaw-dropping $5.6 billion full-year loss in 2015, includes completely exiting the coal sector by selling its remaining operations in Australia, South Africa and Colombia.
The London-listed miner also said it would extract itself, over time, from its iron ore business, including its Kumba unit in South Africa and its Minas-Rio project in Brazil. However, Anglo said it might retain the Brazilian operation for at least three years.
Nickel units, and a minority stake in the Samancor manganese business controlled by South32 (ASX, LON:S32), would also go, the company said.
Instead, the world’s number five diversified miner will focus on its copper, diamonds and platinum businesses.
Anglo is putting its business through the mill — it plans to sell or shut down about 65% of its current activities and drastically reduce staffing and costs.
The company expects to raise between $3 billion and $4 billion this year after completing the sale of these once-prized assets. As a result, Anglo American will end up with barely 16 mines, less than half the 55 it operated by the end of last year, and fewer than the “low 20s” it originally announced.
Anglo plans to extract itself, over time, from its iron ore business, including its Kumba unit in South Africa and its Minas-Rio project in Brazil (pictured). (Image courtesy of Anglo American)
Chief Executive, Mark Cutifani, admitted that the current challenging environment is not the best scenario for disposing assets. However, he said Anglo already had bids on the table for a number of the mines up for sale.
“While we have accelerated our disposal processes, and given our targeted positive free cash flow and our robust liquidity position, we will take appropriate time to secure value outcomes from the disposal programme,” Cutifani said in statement.
He said the firm is also targeting an additional $1.9 billion of earnings before interest and taxes benefits this year.
Anglo’s $5.6 billion net loss compared with a net loss of $2.5 billion the previous year. The steep decline marks another blow for the miner, which has cut its dividend and taken massive write-downs on big projects, including $5.7 billion in after-tax impairment charges last year.
On Monday, Moody’s Investors Service axed Anglo’s debt rating to junk status, making it the first of the top-five miners to see its credit rating cut to below investment grade.
Anglo American’s shares have tumbled 70% over the past year, making it the worst performer out of the U.K.’s blue chip FTSE 100 index.
The stock was trading slightly down (1.17%) on Tuesday afternoon to 388.45 p. It remains almost 80% below its 2008 peak.
3 Comments
Scott
Why are you highlighting phrases in bold text? Do you think your readers too stupid to work out what’s important without you spoon feeding it to them? Maybe a diverse readership focuses on other parts you deem not important. Do you want a job with The Sun? Seriously.
EMILIO ZUNIGA
Anglo situation happens when you hire corporate starlets into a business that needs a fellow that goes down to earth in all that matters.
Juan
Too big to fall? Think again