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Anglo restructures to counter downturn

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World Coal,

Anglo American has announced a series of measures, including the loss of 85 000 jobs, aimed at steering the company through the current route in commodity prices.

“We are setting out an accelerated and more aggressive resturcting of the portfolio to focus is around our ‘Priority 1’, Mark Cutifani, CEO of Anglo said at a recent investors day, adding that the severity of the commodity downturn required “bolder action” than the company had previously announced.

Under the proposals, Anglo American will lose about two-thirds of its workforce and assets as mines are sold or closed. It will also consolidate its six business units into three – De Beers, Industrial Metals and Bulk Commodities, which will include the miners coal and iron ore assets.

The company will also aim for US$3.7 billion of cost and productivity improvements by 2017, while CAPEX will be cut by a further US$1 billion to the end of 2016 with a US$2.9 billion aggregate CAPEX reduction for 2015 – 2017 compared to original guidance.

“As we redefine our operational footprint, we are aligning our organisation to ensure optimal efficiency and effectiveness,” said Cutifani. Yet not all were won over by the plans with Hanre Rossouw of Investec Asset Management, an Anglo shareholder, telling the Financial Times that other miners have been “more decisive in terms of making the tough calls.”

“There is shuffling of paper but very little action […] other than the dividend cut […] there’s no big news,” Rossouw added. “Mark needed to pull a rabbit out of the hat and he has not.”

The company may also find it difficult to push through its reform agenda – particularly when it comes to closing or selling mines – because of its significant position in South Africa, where any changes require delicate negotiation with an unpredictable government and militant unions.

Anglo American has been one of the worst performers on the London Stock Exchange with its share price at its lowest level since it began trading in London in 1999.

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