Anglo American PLC has announces it will leave the coal business and exit a sizeable chunk of its iron-ore activities, as part of an aggressive restructuring that would turn the battered mining giant’s focus on higher- margin commodities.
Mark Cutifani, Chief Executive of Anglo American said the company will re-focus their portfolio on their global leadership positions in commodities such as diamonds, platinum and copper.
“This unique combination of assets, enhanced by our commercial marketing expertise, will have the advantage of benefiting from the ongoing shift away from infrastructure investment towards consumer-driven demand, positioning Anglo American for these expanding markets. We will manage our other assets, in bulk commodities and other minerals, for cash generation or disposal over time,” he said.
The London-based company unveiled details of the restructuring after posting a $5.6 billion loss for 2015—its largest in recent memory—as a global rout in commodity prices punished the costly mines it operates around the world.
The plunge in commodities, sparked by diminished appetite from China and a seemingly unstoppable gusher of production, has ravaged mining companies—and their investors—in the past year. In response, miners are scrambling to salvage balance sheets bloated with debt that piled up during better days.
Anglo said it plans to reduce its total number of mining operations it runs to 16 from 45, a steeper decline than the target 25 operations announced in December. The company plans to completely exit the coal-mining industry and to sharply pare down its iron-ore operations—a radical shift for a company that once dominated the South African coal industry and made billions of dollars of investments into iron-ore mines. Coal accounted for about one-fifth Anglo American’s earnings before interest and taxes in 2015.
Mark Cutifani, Chief Executive of Anglo American, said Anglo American are taking decisive action to sustainably improve cash flows and materially reduce net debt, while focusing on their most competitive assets.
“We have detailed a series of measures, including $1.9 billion of additional EBIT benefits from cost and productivity improvements to deliver positive free cash flow in 2016 and beyond, and an additional $3-4 billion in asset disposal proceeds. As a result, we are targeting net debt of less than $10 billion in 2016, assuming current commodity prices and exchange rates. In the medium term, we are targeting net debt of $6 billion, supporting a return to a solid investment grade credit rating.”
Mr Cutifani said he recognises the current challenging environment to complete deals.
“We are already engaged with parties interested in several of our assets, but we will only complete those transactions which deliver appropriate value for our investors.”
Source: Nasdaq
