Chief Executive Mark Cutifani said the severity of the commodity price downturn required bolder action.
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Shares in Anglo American (LON:AAL) nosedived Tuesday after the miner announced drastic measures meant to cope with an ongoing rout in commodities prices, including massive lay offs, asset sales and an expected suspension of dividend payments.
“As a next step and as we determine the future portfolio, we will be consolidating our six business unit structures into three, De Beers, Industrial Metals and Bulk Commodities, providing further opportunity to reduce the cost burden on our business”.
“But bear in mind that these include assets that we will sell, so the 85,000 jobs don’t [all] disappear as many will be employed by new owners of those mines that we sell”, he said. In November, an analyst note from HSBC quoted by the Financial Times suggested that Anglo could save around £730 million ($1.1 billion) by suspending its dividend.
The steep cuts imply “Anglo is preparing itself for a potentially prolonged period” of low commodity prices, Mr. Meyer said.
“No one likes to suspend a dividend”, Mr. Cutifani said.
Anglo will dispose of certain parts of its business, including its phosphate and niobium mining operations, hoping to raise around £2.7 billion ($4 billion).
A modest recovery in oil prices – with Brent crude bobbing back above $40 per barrel – was shrugged off by markets, which also remain anxious over China’s ongoing economic woes.
Anglo American struck a new all-time low at 277.6 pence, but later recovered ground to stand off by 1.5 percent a day after the firm announced an “accelerated and more radical restructuring programme” designed “to transform the Company’s competitive position”. The company’s net debt guidance at end 2015 was unchanged at $US13 billion-$US13.5 billion.
Equity markets in Paris, London and Frankfurt lost between 1.4 and 2.0 per cent, while the broad-based S&P 500 in the United States shed 0.7 per cent.
Spreadex analyst Connor Campbell said: “Both oil and mining sectors are in dire straits at the moment, so the fact that the United Kingdom index isn’t approaching a three-digit decline is fairly remarkable”. It has weighed on the prices of nearly every commodity, from copper and iron ore to coal, all of which Anglo American produces.
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According to a recent article from the Wall Street Journal, several hedge funds have scored major gains by shorting Anglo American stock. Any downgrade would not impact the cost of financing or the way Anglo runs its business, he said, adding that the company has no plans to tap shareholders for more money. The same goes for Anglo-Australian BHP Billiton, whose shares dropped 6 percent and Chile’s Antofagasta, whose stock dropped 5 percent.
