Cost Management

Miner Anglo American to Dump Assets, Slash Workforce

Plunging commodity prices spark the radical restructuring.
Katie Kuehner-HebertDecember 8, 2015

Bowing to the realities of the teetering mining industry, Anglo American on Tuesday announced that it will embark on a “radical portfolio restructuring” that will include slashing 85,000 of its 135,000 jobs and offloading three-fifths of its assets.

The London-based global company, which has been hammered by plunging commodity prices, aims to raise $4 billion (£2.7 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.

Anglo American will also suspend dividends until the end of 2016 and whittle its business down to three divisions: De Beers (diamonds), Industrial Metals (platinum and base metals), and Bulk Commodities (coal and iron ore).

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The miner also lowered its capital spending plans to $3.2 billion in 2016, down from an earlier forecast of $3.6-$3.9 billion, and $2.5 billion in 2017. And the company said it expected to take charges of $3.7 billion to $4.7 billion due to weaker prices and asset closures.

“Together with the additional material capital, cost-saving and productivity measures announced today, we are setting out an accelerated and more aggressive strategic restructuring of the portfolio to focus it around our ‘Priority 1’ assets, being those assets that are best placed to deliver free cash flow through the cycle and that constitute the core long term value proposition of Anglo American,” chief executive Mark Cutifani said in a press release.

Cutifani went on, “While we have continued to deliver our business restructuring and performance objectives across the board, the severity of commodity price deterioration requires bolder action. We will set out the detail of the future portfolio in February, with the aim of delivering a resilient Anglo American and a step change in the transformation of the Company”.

According to the New York Times, the overhaul at Anglo American highlights the scale of the fallout from the commodities slide, which is forcing mining companies across the board to cut jobs, investment, and costs. The London-listed company has suffered more than its rivals, largely due to higher-cost iron ore operations compared with larger competitors BHP Billiton and Rio Tinto.

Anglo started paring back, in 2013 but Cutifani said the company had to take “bolder action” to focus on assets that would deliver cash flow throughout the economic cycle.