Commodities crash pushes Anglo American to deepen overhaul

LONDON: Global mining giant Anglo American announced Tuesday a “radical” restructuring of the company, writing off billions of dollars in the process, as commodity prices crash on world markets.

It comes as sector rival Rio Tinto announced plans to slash its spending next year owing to sliding metals prices.

“While we have continued to deliver our business restructuring and performance objectives across the board, the severity of commodity price deterioration requires bolder action,” chief executive Mark Cutifani said in a statement, alongside news of impairments totalling between US$3.7bil and US$4.7bil (RM15.8bil and RM20.2bil).

The prices of metals and other raw materials, notably oil, are sliding on markets owing to weak demand growth, in particular from the world’s second biggest economy China.

Cutifani added that Anglo American plans to halve its business setup to leave just three components -- its diamonds operation De Beers, Industrial Metals and Bulk Commodities.

“Anglo American is today setting out an accelerated and more radical restructuring programme to redefine the focus of its asset portfolio to transform the company’s competitive position and create a more resilient business to deliver sustainable shareholder returns,” the group statement said.

Delivering a blow to shareholders however, Anglo said it would suspend dividend payments until the end of next year.

Anglo’s share price slumped following the announcements, trading down 8.8% at 337 pence on London’s benchmark FTSE 100 index, which was down 0.3% overall in morning deals.

The London-listed company said it expects “impairments of US$3.7bil - US$4.7bil, largely due to weaker prices and asset closures”.

No details were provided regarding the number of job positions affected by the changes but Anglo said it would further slash investment through to the end of next year by about US$1.0bil (RM4.26bil).

Earlier Tuesday, Rio Tinto said it planned to slash spending next year by a similar amount to maintain profits in the face of the commodities price rout.

The weak demand growth situation has been worsened by a supply glut blamed on rising output by leading miners, including BHP Billiton and Rio.

Tumbling values for commodities, including Rio’s main raw material iron ore, has massively increased the pressure on mining firms.

Rio said in a statement that capital spending for 2016 was expected to be around US$5.0bil (RM21.3bil) compared to previous forecasts of less than US$6.0bil (RM25.5bil).

The price of iron ore tumbled to US$39.60 (RM168.74) Tuesday, a multi-year low, after peaking near US$200 (RM852.21) a tonne in 2011.

Critics have argued that large miners such as BHP and Rio raise output despite falling prices to try to flood the market and drive smaller competitors out of business.

Rio Tinto shares were down a hefty 4.7% and BHP Billiton plunged 5.3% in early London deals. - AFP

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