Anglo American restructuring shows dire market troubles

Analysts say the restructuring announced by Anglo American is a sign of the effect of commodity prices.

Anglo American Platinum’s Khuseleka mine shaft in Marikana, North West. Picture: Vumani Mkhize/EWN.

JOHANNESBURG - Anglo American's announcement that it's postponing further investment, reviewing unprofitable operations and cutting up to 60 percent of its assets, has been met with mixed reaction by mining analysts.

The announcements were made by the company CEO Mark Cutifani in London yesterday, where he outlined proposed restructuring which would radically affect its platinum and iron ore operations.

Anglo American also announced that its capital expenditure for next year will be 55 percent less than the nearly $5 billion it spent last year.

Mining analyst Mamokgheti Molopyane said the restructuring announced by Anglo American is a sign of the effect of commodity prices on its ability to function.

"When you look at how iron ore and platinum and coal and other commodities in which a company has their core business has performed in the past 18 months, then you realise that it was coming."

Fellow analyst Peter Major said the share price drop of nearly 12 percent was met with shock and reflects the overall situation.

"It shows the dire situation. But Anglo's especially is a bit like the Titanic, is it going to sink, how fast is it going to sink?"

The restructuring means 3,500 and 80 direct and indirect jobs are at risk in the short-term, with negotiations to retrench the workers already underway.