Anglo prioritises Zim unit

HARARE - Anglo American Plc (Anglo) is keen to keep its Zimbabwean platinum unit, Unki Mine, despite a continued drop in international metal prices.

This comes as the multinational company — with a majority stake in the Shurugwi-based platinum miner — is hoping to raise $3-4 billion of asset sales this year as it plans a course to recover from the commodities rout.

Under the strategy, Anglo will be disposing of some of its largest and oldest business units.

Responding to investor concerns, the diversified mining group promised to cut net debt by more than a quarter this year and said that it would also generate positive cash flow in spite of the commodities downturn.

Anglo’s plans, unveiled last week, are a step up from commitments given in December. Then, proposals to radically reshape the mining group’s portfolio were given a poor reception over the lack of detail and an admission that the company was likely to continue to lose cash in 2016.

The company chief executive, Mark Cutifani, said that Anglo would focus only on its copper, diamonds and platinum businesses.

Anglo is to leave its coal operations in Australia, South Africa and Colombia, subject to receiving good offers for the mines it has for sale. Anglo will also extract itself, over time, from its iron ore business, including its Kumba unit in South Africa and its Minas-Rio project in Brazil, although the group is likely to retain the latter for at least three years.

Nickel units, and a minority stake in the Samancor manganese business controlled by South32, would also go, said the South Africa-based chief executive ..

“We of course recognise the current challenging environment in which to deliver disposals . . . we will take appropriate time to secure value outcomes from the disposal programme,” he added.

The mining group announced a record pre-tax loss of $5,5 billion for 2015, driven by $7,2 billion of exceptional charges. The group posted $3,8 billion of asset impairments in the second half of the year.

Underlying earnings before interest and tax fell 55 per cent to $2,2 billion, and revenue declined 26 per cent to $23 billion.

The company reported that its net debt at the end of 2015 stood at $12,9 billion. This would fall to $10 billion by the end of 2016 and to $6 billion over the medium term, said Anglo, partly through asset sales.

It also said that it had deepened its cost-cutting plans and should now generate positive cash flow this year. Two months ago the miner said it would have $1 billion of negative cash flow in 2016.

Anglo said its focus on just 16 assets would bring staff numbers down to about 50 000, from 128 000 at the end of last year. About 68 000 jobs will transfer with businesses while about 10 000 will be cut.

The group’s decision to step away from bulk commodities such as coal and iron ore reflects its more marginal cost positions in iron ore.

But Anglo also said that it acknowledged changing demand in China, with “evolution away from bulk commodity intensive infrastructure development to increasing demand for base and precious metals for homes, vehicles, household appliances and electronics, as well as for luxury goods”.

Among the assets now marked for disposal are Grosvenor and Moranbah, two of Anglo’s larger and more efficient Australian coal mines.

“The company has clearly made concerted and successful cost-cutting efforts, and has given a positive update on the restructuring process,” Bernstein Research analyst Paul Gait said.

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