Anglo American looks to cut debt through asset sales

Anglo American said on Tuesday it plans to sell its iron ore, coal and nickel units as part of a sweeping strategic overhaul to cope with a commodities rout that has triggered a fight for survival even among heavyweight miners.

The global mining group plans to concentrate on its De Beers diamond business as well as platinum and copper operations as it dumps loss-making bulk commodities.

Anglo, the world’s fifth-biggest diversified global mining group by value, wants to raise as much as $4 billion from the sale of assets in 2016 to cut net debt to under $10 billion by the end of the year.

"We are taking decisive action to sustainably improve our cash flows and materially reduce net debt, while focusing on our most competitive assets," said Anglo chief executive Mark Cutifani.

The company plans to retain only 16 core assets from 45 previously and expects to shed 78,000 jobs from a workforce of around 128,000, mostly through asset sales.

The global commodity rout, which has seen crude oil and copper prices hit multi-year lows, has forced Anglo and rivals to sell assets and cut dividends and capital spending to preserve cash and reduce debt.

However, analysts said it might be hard to find buyers for assets in the current circumstances.

“We suggested in May last year that Anglo should exit its iron ore portfolio. Sadly it is now doing so in a considerably weaker commodity price environment,” Investec said in a note.

Ratings agency Moody’s on Monday downgraded Anglo further into “junk” territory, citing expected lower commodity prices and doubts over how long it would take the company to pay down debt.

Anglo said underlying earnings before interest and tax (EBIT) fell 55 per cent to $2.2 billion, but that was better than a $1.5 billion estimate in a poll of analysts. Anglo has already suspended its dividend.

The company booked a $5.7 billion impairment on assets due to worsening market conditions including a $2.5 billion charge for its Minas-Rio iron ore project in Brazil.

Anglo is not alone in feeling the pinch of tumbling commodity prices. Rival Rio Tinto last week broke with its policy of raising dividends after slumping to a net loss for 2015, while BHP Billiton is expected to report a first net loss in more than 16 years later this month. – Reuters