Anglo’s great sell-off after £3.9bn loss
TROUBLED Anglo American is to shed 85,000 jobs and reduce its mining operations by two-thirds as the catastrophic rout of commodities left it nursing a £3.9bn loss.
The struggling FTSE 100 listed miner, whose shares have tumbled nearly 70pc on a year ago, will slash debt by nearly £7bn, sell off nearly £3bn more of assets and shrink spending by 25pc to £2.1bn.
And despite the dramatic rescue plan, some analysts predict it will be forced to turn to shareholders to raise more money.
They predicted a rights issue and meanwhile credit rating agency Moody’s slashed its debt rating to junk status.
Moody’s decision has made Anglo the first top-five global mining firm to see its credit rating cut to below investment grade.
The cuts are the latest unveiled by chief executive Mark Cutifani following his announcement in december. He now plans to reduce the total number of mining operations it runs to 16 from 45, even fewer than the 25 it had planned to keep.
Previously, Anglo operated 55 assets across seven different commodities. Cutifani plans to ditch coal and significantly reduce iron ore to focus on consumer- driven commodities: diamonds (the group controls diamond miner de Beers), platinum and copper.
It plans to reduce net debt from £9bn to less than £7bn by the end of this year and increased its disposal target from £1.4bn to around £3bn. At the end of November the miner had 135,000 employees and it plans to eventually reduced this to as few as 50,000. More than 68,000 jobs will go as part of the sales of mines to other companies and the rest will be redundancies.
It will leave Anglo with just 5,000 managerial and administrative roles, a 60pc reduction on the 11,500 it currently has. Anglo has been hit by the slump in commodity prices dragged down by slowing demand from China – the world’s second-largest economy and the biggest consumer of commodities such as iron ore and aluminium.
China’s previously booming construction sector buoyed a commodities ‘super- cycle’ with insatiable demand for commodities such as iron ore which is used to make steel. However, as China slowly moves from a services-led to a consumeroriented economy, the commodities sector has been devastated.
Major mining groups such as Glencore have also slashed costs, debt and suspended dividends to cope with the change. Its tumbling share price has meant Anglo is the worst FTSE 100 performer. It has suspended its dividend and yesterday its shares rose 4.9p to 397.95p.
Speaking about the Moody’s downgrade, Cutifani said it ‘has no practical impact on what we’re doing and how we’re running the business’. And he denied accusations that Anglo was holding a fire sale of assets, saying: ‘We don’t need to sell any of the assets under value.’
The asset sell-off includes all its coal mines in South Africa, Australia and Colombia and its Kumba iron ore mine in South Africa.
Cutifani expects to also sell its Minas Rio iron ore business in Brazil but will finish building the project and in two to three years time will begin a review which is expected to lead to a sale. Although his further cost slashing is wel- comed by investors some analysts believed it did not go far enough.
Nik Stanojevic, equity analyst at Brewin dolphin, said: ‘Many of Anglo’s assets have higher unit costs than peers and if commodity demand falls further, then several may eventually need to close. Even if it succeeds in reducing net debt, leverage will still be relatively high.
‘Our base case remains that commodity prices take another leg down, free cash flow remains negative and Anglo does require substantial equity funding.’