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World's Fifth Largest Miner Announces Massive Layoffs, Suspends Dividend, Sells 60% Of Portfolio

Tyler Durden's picture




 

If you’re a miner, this is “not the time for courage” (to borrow a classic Gartman-ism). 

The global slump in commodities shows no sign of abating and a stubborn OPEC isn’t doing anything to help matters. Meanwhile, China’s economy continues to decelerate and while last night’s trade data showed demand “improving”, it’s important to put the import “beat” in context - imports still fell by nearly 9% Y/Y last month and while iron ore imports were up M/M in November, average prices for the first eleven months of 2015 are still down more than 39%. As MNI notes, “customs data showed that after seasonal adjustment, November imports were still 3.6% lower than a month ago.”

All of this has become par for the course and indeed, it now appears we may have entered a new era where sluggish global growth and trade has become the norm. 

Against this backdrop, commodities producers (both at the state and company level) are struggling to survive. The world is mired in a global deflationary supply glut, and without a commensurate pickup in aggregate demand, it looks like the oversupply and overcapacity problem may be here to stay. 

In the latest example of just how bad things have gotten, Anglo American - the world’s fifth largest miner - just kitchen sink-ed it, announcing a sweeping restructuring, a massive round of layoffs, and a dividend cut. The company will reduce its assets by some 60% while headcount will be cut by a whopping 85,000 or, nearly two thirds. 


“We think the best answer for our shareholders is to go down to smaller, high quality, more resilient portfolio where we think we can deploy capital more effectively,” Anglo American Chief Executive Mark Cutifani said Tuesday.

Maybe, but shareholders weren’t happy to see their payout cut for H2 and for the entirety of next year. The stock fell sharply, dropping nearly than 10% at one point to a record low. "Anglo fell 7.9 percent to 339.95 pence by 11:12 a.m. in London, giving the company a market value of $6.5 billion. The shares earlier touched the lowest since being listed in 1999. The last time Anglo cut its dividend, during the depths of the global financial crisis in 2009, the shares plunged 17 percent in one day," Bloomberg reminds us

“No one likes to suspend a dividend,” Cutifani said on a call with reporters. “We think it’s the right thing to do to make sure the company remains in good shape.”

As of now, the company will dump its niobium and phosphates business and will increased its divestment target from $3bn to $4bn but CEO Mark Cutifani says there could be more to come. “We are open to possibilities but in this market there will also be some closures. Any asset that is cash-negative will not remain in the portfolio it is a strategic call and we are not going to look back.”

Writedowns due to market conditions and business closures are set to total between $3.7 billion and $4.7 billion while capex for 2016 will now be $700 million lower than the $3.9 billion forecast.

As FT notes, “the decision confirms an industry pullback from investment. Rio Tinto also said on Tuesday that it would cut capex in 2016 from $6bn to about $5bn.” 

WSJ

"After the restructuring, Anglo will be a much smaller company," Bloomberg goes on to note, adding that "it will control 20 to 25 assets split across three divisions of its De Beers diamond unit, industrial metals and bulk commodities. Anglo currently has about 55 assets."

Here's a bullet point summary of the portfolio restructuring from Citi who has Anglo at Neutral/High Risk:

  • The company will consolidate all business under three head from current six: namely - De Beers, Industrial Metals and Bulk commodities.
  • Mothballing cash negative Snap lake operations and closure of Thabazimbi mine as it reached end of life.
  • Reconfiguration of the Sishen pit, the company will target 2016 cost of $30/t FOB with reduced production by 10Mt from 36Mt to ~26Mt for Sishen (Citi est. at 35Mt)
  • Anglo’s London office co-locating with De Beers in FY’17
  • The company expects further cost and productivity gains of $1.1bn in FY’16 and $1bn in 2017 over and above $1.6bn delivered between 2013 and 15.

Meanwhile, WSJ notes that "the company’s majority owned unit, South African miner Anglo American Platinum Ltd., said that its 2015 profit would be at least 20% lower than it was last year." 

"[The company] just released a business update, announcing (i) headcount cuts of 2,300 people, (ii) R14bn of impairments, (iii) further capex cuts, and (iv) an update on asset sales," Citi recounts, before saying that "although all these are necessary, they do not solve the core problem of oversupply in the industry, nor ensure AMS’s long-term profitability."

Right. And we can probably say the same thing for the parent, because as we've said on too many occasions to count of late, the world's engine of global growth and trade (China) is at damn near stall speed and the outlook for commodities is decidedly grim. 

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Tue, 12/08/2015 - 08:43 | 6892591 falak pema
falak pema's picture

wait for <glencore.

Tue, 12/08/2015 - 08:44 | 6892597 -.-
-.-'s picture

This, too, means war (if you think that I'm just Myna Birding it here, then read some history)

Tue, 12/08/2015 - 08:52 | 6892613 VinceFostersGhost
VinceFostersGhost's picture

 

 

Still got my Bre-X stocks.....you guys just wait.

 

Actually I think it's stock....without the S.

 

You know what I mean....

Tue, 12/08/2015 - 08:53 | 6892635 Ajax_USB_Port_R...
Ajax_USB_Port_Repair_Service_'s picture

I have a Bre-X 100 share stock cert. Cost me $1.00 plus shipping right after 'the fall'.

Tue, 12/08/2015 - 09:10 | 6892689 Shocker
Shocker's picture

These are some crazy numbers... recovery sure

Layoff List: http://www.dailyjobcuts.com

-

Tue, 12/08/2015 - 09:16 | 6892714 Ajax_USB_Port_R...
Ajax_USB_Port_Repair_Service_'s picture

"Gulfstream is set to lay off 1,100 workers across all its domestic locations."

With unemployment at 5% and the economy on the rebound? Gulfstream is making a big mistake! Don't they watch CNBC?

Tue, 12/08/2015 - 09:23 | 6892752 CheapBastard
CheapBastard's picture

All part of Barry's Robust Recovery.

Tue, 12/08/2015 - 08:51 | 6892622 Ajax_USB_Port_R...
Ajax_USB_Port_Repair_Service_'s picture

Glencore Glen Ross

Tue, 12/08/2015 - 09:28 | 6892774 chinoslims
chinoslims's picture

Iron ore is for closers

Tue, 12/08/2015 - 10:52 | 6893114 Sudden Debt
Sudden Debt's picture

He who digs a hole for another...

 

They dropped 10% yesterday also, and they have about 20% more to drop because they'll lose everything they recovered from their blow.

Tue, 12/08/2015 - 10:47 | 6893255 junction
junction's picture

Fist things first, fire Anglo American Chief Executive Mark Cutifani's sorry ass!  The word "accountability" was used a lot 15 years ago.  No more.  If Debbie Wasserman Schultz can still be the Democratic National Chair, after the 2014 election disaster for Democrats, then accountability no longer exists for anyone but drivers getting red light and speed camera tickets. 

Tue, 12/08/2015 - 11:44 | 6893646 Angel_Eyes
Angel_Eyes's picture

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Tue, 12/08/2015 - 08:43 | 6892592 Road Hazard
Road Hazard's picture

But the economic downturn is over, right?

 

Tue, 12/08/2015 - 08:51 | 6892627 VinceFostersGhost
VinceFostersGhost's picture

 

 

Blue skies....slight chance of rain.

 

OK....a lot of rain.

Tue, 12/08/2015 - 10:19 | 6893120 Sudden Debt
Sudden Debt's picture

unless... You live in California...

Tue, 12/08/2015 - 08:44 | 6892596 mandalou
mandalou's picture

Time to smack down gold and silver this morning again. Amazing world we live in.

Tue, 12/08/2015 - 08:50 | 6892615 nmewn
nmewn's picture

Looks like I'll meet my retirement goals after all ;-)

Tue, 12/08/2015 - 08:54 | 6892638 mandalou
mandalou's picture

Was the goal quantity or price?

It is hard not to keep adding at cheap prices. People accept joobux backed by nothing and allow me to give them said joobux for a real asset.....ok, where do I sign up?

Tue, 12/08/2015 - 09:06 | 6892678 franzpick
franzpick's picture

The smackdown numbers are Au 900-something, Ag 9-something, crude 20-something, world trade off 30-something-%, and for Keynesian politicians, something to behold. See the monthlies:

http://finviz.com/futures_charts.ashx?t=SI&p=m1

Tue, 12/08/2015 - 09:38 | 6892844 mandalou
mandalou's picture

What can we do?

Well we just keep backing up the pickup and load up. They are doing it too because it is "tradition".

Tue, 12/08/2015 - 11:36 | 6893581 Anopheles
Anopheles's picture

But don't be fooled.  PMs are luxuries that are bought in good times.  Consider that   over 50% of gold mined each year goes into JEWELRY.    What happens to jewelry when the global economy tanks?  How do you think PM prices will respond? 

 

What happened to oil prices with just a few percent over-capacity? 

Tue, 12/08/2015 - 08:46 | 6892600 reload
reload's picture

wow - knife catchers form an orderly que.

Tue, 12/08/2015 - 08:50 | 6892620 VinceFostersGhost
VinceFostersGhost's picture

 

 

We'll let you go first....if you really want too.

Tue, 12/08/2015 - 08:46 | 6892604 Peter Pan
Peter Pan's picture

The only headcount I do not see being reduced in this world is in the number of useless politicians.

It's as if they are above and beyond the masses, the market, the law and reality.

As for the layoffs I can only presume that the Bureau of Stats as well as the barmen and waitress jobs will come to the rescue at least for psychological reasons.

Tue, 12/08/2015 - 08:50 | 6892607 Monetas
Monetas's picture

Good for miners .... who haven't started mining, yet .... no one to lay off .... low maintenance overhead .... their assets are safe in the ground .... like Mines Management, etc. .... two employees and a fax machine .... in a small office in Spokane ?

Tue, 12/08/2015 - 08:51 | 6892624 franzpick
franzpick's picture

headcount will be cut by a whopping 85,000...

2/3 here and 2/3 there and pretty soon you're talking big numbers.

Tue, 12/08/2015 - 08:51 | 6892630 Somewhat Evolve...
Somewhat Evolved Monkey's picture

The market can remain irrational longer than one can remain solvent.

Or something like dat man.

Tue, 12/08/2015 - 08:52 | 6892631 youngman
youngman's picture

This should cut the production of PMs too..they are a by product of many of these mines....add in the drop in prices and not much capital expenses

Tue, 12/08/2015 - 11:42 | 6893537 Anopheles
Anopheles's picture

No, they're selling off their assets, not closing them down (unless they are losing money)   

They are closing diamond and iron ore mines, not copper and base metals. 

Tue, 12/08/2015 - 08:53 | 6892632 FrankieGoesToHo...
FrankieGoesToHollywood's picture

The primary goal of a business is to stay in business.

Tue, 12/08/2015 - 10:19 | 6893116 mkucstars
mkucstars's picture

I thought it was bonuses for management! Doh...

Tue, 12/08/2015 - 08:54 | 6892636 overmedicatedun...
overmedicatedundersexed's picture

the central banks of the world have saved us all, except those that produce physical items (one exception are iphone devices)..with their continued policies even high tech will learn this lesson. Crime is eating the world economy. no justice resulting in disrespect for all laws by the common man.

free corzine.

Tue, 12/08/2015 - 08:56 | 6892641 mandalou
mandalou's picture

Wait until you see the iphone 50 s. When they realese it in 2150 it will drive the markets higher.

Tue, 12/08/2015 - 09:03 | 6892667 I am Jobe
I am Jobe's picture

The dumbness will continue for sure people will still be lining up 

Tue, 12/08/2015 - 09:20 | 6892728 Ajax_USB_Port_R...
Ajax_USB_Port_Repair_Service_'s picture

And the iphone 50 will be made in the former USA by children working for slave wages.

Tue, 12/08/2015 - 08:57 | 6892647 williambanzai7
williambanzai7's picture

What does Krugturd think?

Tue, 12/08/2015 - 09:09 | 6892680 VinceFostersGhost
VinceFostersGhost's picture

 

 

He thinks his shirtless selfie with his Nobel Prize and Geraldo Rivera.....looks pretty damn sexy. 

Tue, 12/08/2015 - 08:58 | 6892649 dobermangang
dobermangang's picture

The gravy train is over once China stopped building all those ghost cities.  Reality is going to really suck for the world markets going forward.

Tue, 12/08/2015 - 11:43 | 6893631 Anopheles
Anopheles's picture

And China built those ghost cities all with borrowed money......  Double whammy. 

Tue, 12/08/2015 - 09:00 | 6892660 fiftybagger
fiftybagger's picture

Here's a winning strategy:  Produce and sell a good or service when there is an unofficial and even official government policy to suppress the price of it at any cost.

Miners are for morons.

 

Silver For The People

 

Tue, 12/08/2015 - 09:02 | 6892664 jm
jm's picture

Glencore 5Y credit spread is 800 bps.  Even before this Anglo spreads were rich to this dead man walking.

 

Tue, 12/08/2015 - 09:03 | 6892668 rsnoble
rsnoble's picture

Suddenly some of those 85k are realizing how important it is to sometimes spend more energy sucking cock and kissing ass than doing their actual job.

You know, like some fat bossy bitch that can't actually do the work, makes poor choices, but has her head up her bosses ass and suddenly finds herself directing others.  I've seen it happen time and time again.

Tue, 12/08/2015 - 09:10 | 6892690 overmedicatedun...
overmedicatedundersexed's picture

well either we have a robust economy with low un employment, or the MSM and .gov  plus  CBanks of the world are spinning lies..85,000 layed off is the sign someone is lying.

Tue, 12/08/2015 - 09:23 | 6892746 Pliskin
Pliskin's picture

'You know, like some fat bossy bitch that can't actually do the work, makes poor choices, but has her head up her bosses ass and suddenly finds herself directing others. '

So, Vicky Nuland then?

Tue, 12/08/2015 - 09:42 | 6892863 thestarl
thestarl's picture

Human fucking resources

Tue, 12/08/2015 - 09:04 | 6892672 danepol
danepol's picture

Who would've thunk ... Anglo American, the buy and lock-away share of my grandpa and generations of South Africans past. Time to buy again? Guess not yet.

Tue, 12/08/2015 - 09:12 | 6892699 pliny the longer
pliny the longer's picture

well its about F 'ing time, finally some green shoots;  i guess maybe we should raise rates after all . . .

 

Tue, 12/08/2015 - 10:00 | 6893014 buzzsaw99
buzzsaw99's picture

don't worry about Cutifani. he got plenty.

Tue, 12/08/2015 - 10:27 | 6893167 DuneCreature
DuneCreature's picture

Hmm, that De Beers chunk of the chart catches my attention. … Does that mean a portable store of value is still VERY important to people who still have real value to store?

Long glittery.

~ DC

Tue, 12/08/2015 - 10:34 | 6893196 venturen
venturen's picture

I guess the vampire squid is done with the miners....pumped and now dumped. Waiting to buy the bonds to take ownership from the destroyed companies they advised to destruction. WHAT A GREAT BUSINESS MODEL...of making the monkeys dance! 

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