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Anglo American slumps another 13%, losing £1.2bn since restructuring news

Discussion in 'Market News' started by Lily, Dec 9, 2015.

  1. Lily

    Lily Forum Member

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    Mining group hit by debt concerns after dramatic fall in iron ore prices

    Anglo American shares have dropped sharply for the second day running, as investors flee the company following its plans to suspend its dividend and dispose of more than half its mines in a response to the slump in commodity prices.

    Anglo said on Tuesday it would sell or close up to 35 mines and cut employee and contractor numbers from 135,000 to fewer than 50,000 after 2017.

    In our view the company has a 12 month window to execute on sales and improve cash flows; otherwise pressure on debt levels and raising equity will increase further.

    In our opinion, the balance sheet concerns are... likely to remain until commodity prices improve or net debt is reduced...

    Anglo flags there is a risk the Kumba [subsidiary] will breach its debt covenants in 2016 if iron ore remains below $40 a tonne.

    In difficult markets, the company is trying to accelerate its restructuring and enhance its balance sheet. The challenge remains substantial. When commodity prices do recover, the share price recovery could be significant, but in the meantime investors should remain wary.

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