Anglo American likely to cut its dividend

ANGLO American was likely to be the next mining firm to follow Glencore’s example in cutting its dividend to help contain debt levels and preserve cash amid a global commodity market slump, analysts and bankers said.

Glencore, weighed down by net debt of $30 billion (R405.52bn) and hurt by declines in its key products of copper and coal to six-year lows, this week suspended dividends and said it would sell assets and raise $2.5bn in a share sale.

The rout in commodity prices is putting pressure on credit ratings and dividends across the mining sector, prompting reductions in capital expenditure, operational costs and jobs.

Among Glencore’s

big mining rivals, Rio Tinto and BHP Billiton have both reaffirmed their commitment to paying a dividend, but Anglo is seen as more vulnerable due to its higher-cost iron ore assets, loss-making platinum assets and slower than expected progress with its restructuring plans.

“We have seen Teck cut their dividend, we have seen Glencore cut their dividend and I think we will see Anglo American cut their dividend,” Bernstein Research analyst Paul Gait said.

Canadian miner Teck Resources announced a 67 percent cut in its dividend in April, citing weakening Chinese demand for steelmaking coal.

“Given the set of commodities that they (Anglo) have got, their ability to pay a dividend without raising their debt is harder than for any other mining company,” said Gait, a view echoed by two sector bankers.

Anglo spokesman James Wyatt-Tilby said the company board made dividend decisions every six months, with the next review set for February. He gave no further details.

Anglo, the fifth-biggest diversified global mining group by stock market capitalisation, said in July it would cut about 6 000 jobs and might put up more assets for sale as the slump in metals prices dragged its share price to 13year lows.

Anglo’s total borrowings were at almost $19bn at the end of June, putting its debt to equity at 0.86 times, according to Thomson Reuters data. This compares with a debt-to -equity ratio of 0.59 times for Rio Tinto and 0.48 times for BHP Billiton. – Reuters