Anglo American CEO Mark Cutifani announced the company’s new strategy overnight, describing the new business as streamlined and the changes as “extensive, but essential…we are creating the new Anglo American”.
“We’ve deemed all the coal assets in Australia as non-core,” he said in a video released by the company,” and have processes across all of those assets.”
“Disposals processes are underway in the Moranbah and Grosvenor coal assets.”
No mention was made of Grasstree in his video statement.
“Changes that involve people are never easy, but we are committed to a thorough process and to treating people with the care and respect they deserve,” he said.
The miner will also exit from its nickel, niobium, and phosphate operations globally, cutting jobs from 11,500 today to fewer than 5000.
Anglo American is also focused on exiting its Samcor Manganese joint venture operations it runs in South Africa with South32.
It will continue the progress of divesting its previously named non-core Australian coal assets, having already sold off Callide and the Dartbrook coal mines.
It comes despite an aggressive restructuring plan announced late last year which planned to slash its workforce by two thirds and divest non-core assets.
“The markets are challenging the industry,” Cutifani said, “and that is likely to continue,” explaining the impetus for the new decision.
“Demand growth of certain commodities has slowed, prices also fell steeply, particularly towards the end of last year…and they remain volatile,” he said.
“We are taking decisive action to sustainably improve our cash flows and materially reduce net debt, while focusing on our most competitive assets.”
Anglo American expects these decisions to provide $US1.9 billion in cost and productivity improvements in this year, following a 55 per cent decrease in EBIT for the miner.
“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,” Cutifani said.
“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.
The decision follows on Moody’s downgrading of the miner.
“[The]downgrade of AAL’s ratings to Ba3 from Baa3 primarily reflects Moody’s assessment that the company now faces a higher business risk due to deterioration in commodities market conditions and a longer and more uncertain deleveraging period than previously expected,” the investors service said in a statement.