As Mark Cutifani, Anglo American CEO, explained it, the plan was to set out an “accelerated and more aggressive” restructuring plan that would enable the firm to focus on assets it believes are best placed to deliver free cash flow through the cycle. The overhaul of its business highlights the scale of the commodity slump’s impact on the mining sector.
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Delivering a blow to shareholders however, Anglo said it would suspend dividend payments until the end of next year.
In a presentation to investors, Anglo American said it would sell or close up to 35 mines, leaving it with about 20 sites and cutting employee numbers from 135,000 to fewer than 50,000 after 2017.
It also aims to raise $4 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.
Rio Tinto, the British-Australian miner, also announced a near-$1bn reduction in capital spending for next year, slashing planned investment to $5bn from $8bn in 2014.
The London-listed company said it expects “impairments of $3.7 – $4.7 billion, largely due to weaker prices and asset closures”. The cuts will come in three chunks; £1.1 billion ($1.6 billion) this year, £730 million ($1.1 billion) in 2016, and a final £670 million ($1 billion) in 2017. It said it would reveal details of job cuts at its next investor update in February.
REUTERS/Siphiwe SibekoMiners walk at the end of their shift at the Anglo Platinum’s Khuseleka shaft 1 mine in Rustenburg, northwest of Johannesburg, January 15, 2013.
The last time Anglo cut its dividend, during the depths of the global financial crisis in 2009, the shares plunged 17 percent in one day.
“If the most pessimistic City analysts are to be believed, Anglo will require a rights issue to reduce its debt to sustainable levels”, Rupert Hargreaves of The Motley Fool UK wrote today, noting that the company’s decision to ramp up iron ore output may cost it dearly. It recently reported that earnings were down 36% for the six months to June, compared with the same period in 2014. The company’s stock hit an all-time low on Monday afternoon, but things have gotten even worse on Tuesday morning.
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In related news, insider Nhleko, Phuthuma F. bought 2,065 shares of the business’s stock in a transaction dated Tuesday, October 6th. Anglo American PLC was the topic in 126 analyst reports since July 22, 2015 according to StockzIntelligence Inc.
