Anglo American has revealed plans to accelerate the sale of its iron ore, coal and nickel mines, in a sweeping overhaul after its annual profits more than halved and its bonds were downgraded to junk status.
The UK-listed global mining company said it was reviewing its options regarding its 70% stake in Kumba Iron Ore, Africa’s biggest miner of steel’s key ingredient. The decision speeds up a plan to pull out of coal and iron ore to concentrate on materials that are in greater demand, such as its De Beers diamond operations, platinum and copper.
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Anglo American suspended its dividend in December and said it would sell or close more than half its mines in response to plunging prices of iron ore and other metals. The Kumba disposal is part of a plan to raise $4bn (£2.8bn) from asset sales, in order to cut net debt to less than $10bn this year.
The company also said it would review its options on the ill-fated Rio-Minas iron ore project in Brazil after three years. It said it would exit its entire coal operations in Australia, South Africa and Colombia, subject to receiving good offers.
Mark Cutifani, Anglo American’s chief executive, said: “We have made significant progress, albeit in an environment that has been deteriorating at a faster pace. Today we are announcing detailed and wide-ranging measures to sustainably improve cash flows and materially reduce net debt, while focusing on our most competitive assets to create the new Anglo American.”
Moody’s, the credit rating agency, cut Anglo American’s rating to junk status on Monday, making it the first London-based miner to suffer the fate amid plunging commodity prices. Moody’s said Anglo American would find it more difficult than previously thought to reduce its debt.
Metal prices have fallen because of slowing global economic growth and falling demand from China, the world’s biggest consumer of iron ore, copper, nickel and most other commodities. Anglo American’s shares fell by 75% last year and the FTSE mining index almost halved as the slump battered companies’ valuations.
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Analysts at Royal Bank of Scotland predicted last month that the dividends of oil and mining companies would come under threat from the gloom sweeping through the global economy. Rio Tinto, Anglo American’s larger competitor, scrapped a pledge to maintain its dividend last week after slumping to a net loss for 2015 and posting its worst underlying earnings in 11 years.
Anglo American will consider spinning off the Kumba business to shareholders and will also try to sell the Moranbah and Grosvenor coal mines in Australia. Anglo’s nickel business is also for sale, the company said.
Earnings before interest and tax fell 55% to $2.2bn in the year that ended in December. Analysts had expected earnings to fall 70% to $1.5bn, according to a Reuters poll.
The company’s shares, down 23% this year, fell 6% to 370p in late morning trading.
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