A very important step, one of the first. A good sign for mining down the road, IMO:
Anglo American to Cut 85,000 Jobs Amid Commodity Slump
By IAN AUSTEN and CLIFFORD KRAUSSDEC. 8, 2015
Anglo American's share price over the last 12 months, in British pence.
The pain among energy and mining producers is growing more acute as prices of global commodities continued their collapse on Tuesday. The newest victim is the London-based mining firm Anglo American. On Tuesday, the company announced a drastic restructuring, which includes expanding job cuts, suspending its dividend, reducing its business unit and cutting its assets.
Anglo American is far from alone, as scores of oil, natural gas, and mining companies are feeling the pain from low prices. A number of commodity-related businesses have either declared bankruptcy or fallen behind in their debt payments. Even more frequent have been layoffs — more than 250,000 workers in the oil and gas industry worldwide, with more than a third coming in the United States.
The causes for the onslaught are many, but China looms large. Between 2000 and last year, energy companies invested hundreds of billions of dollars to expand their production capacity to satisfy China, the world’s most populous nation, in a period of rapid economic expansion. Much of the corporate growth was fueled by debt, which was unsustainable as domestic and Chinese demand waned.
After recovering from the financial crisis, commodities prices have fallen sharply since last year. It’s a global problem. At least seven American coal companies have declared bankruptcy this year. The Swiss company Glencore is scrambling to reduce its $30 billion debt by a third before the end of 2016 by slashing its copper-mining operations in Zambia and the Democratic Republic of Congo and selling much of it agricultural business.
Anglo American, the world’s fifth largest mining company, announced it would unload 60 percent of its mines and smelters. It is reducing its 135,000-man work force to 50,000, as it cuts its business units to three from six.
“While we have continued to deliver our business restructuring and performance objectives across the board, the severity of commodity price deterioration requires bolder action,” Mark Cutifani, the company’s chief executive, said in a statement. The company characterized the changes as a more “radical restructuring” than it had previously announced.
Photo
Anglo American's Los Bronces copper mine, in the Andes near Santiago, Chile. The mining company said it would reduce operating costs over the coming year by $1.1 billion.CreditIvan Alvarado/ReutersThe commodity rout has been building for awhile.
Prices for iron ore, the crucial steel-making ingredient, have fallen by about 40 percent this year. Brent crude is now hovering around $40 a barrel, down from more than a $110 last summer.
Since he became Anglo American’s chief executive in 2013, Mr. Cutifani said that not a single month has passed during which any of the products Anglo American mines has risen in price. When he took the job, Mr. Cutifani signaled that the free-spending ways of the commodity price supercycle had ended by selling the corporate jet.
He added to that symbolism Tuesday by announcing that Anglo American would close its London head office and share space in the city with the headquarters of De Beers, its diamond miner. Anglo American said it would reduce operating costs over the coming year by $1.1 billion and cut capital spending by an additional $1 billion in the same period.
Mr. Cutifani is aiming to reduce the company’s size by 60 percent. Anglo American said it now intended to group its operation in three areas: the diamond operations of De Beers; industrial metals like copper; and bulk commodities such as coal.
At an investors’ conference in London, Mr. Cutifani, said Anglo American would simply shut money-losing mines rather than sell them at heavily discounted prices, although he did not entirely rule out asset sales.
“In this sort of environment, nothing can be considered business as usual,” he said. The company characterized the changes as a more “radical restructuring” than it had previously announced.
Details about the job cuts will not be announced until February, but it appears that they will probably focus on the firm’s bulk commodities operations. Mr. Cutifani said the company’s nickel, coal and iron ore mines would have to show that they can reduce costs sufficiently to generate cash for the company despite the commodity downturn.
“If not, they won’t be in the portfolio — it’s as simple as that,” he said. |
