The company’s coal operations reported unit cost reductions for the six months to June 2015 of 13% in Australia and 3% in South Africa in local currency terms, and volume discipline in Canada.
Its Dawson and Foxleigh coal mines in Queensland are already on the “for sale” list as the company tries to desperately take costs out of the operations.
Anglo American CEO Mark Cutifani said: “We will make tough calls. At the end of the day if two or three projects are not able to be sold we will close them if they are losing money.”
The company announced commodity price driven impairments of $US3.5 billion after tax, including $2.9 billion for the new Minas-Rio iron ore mine in Brazil.
Group underlying earnings before interest and tax were down by 36% to $1.9 billion, while the company slumped to a half-year loss of $3 billion.
Production increased by 8% on a copper equivalent basis, while unit costs were down by 5%.
Anglo is targeting $1.5 billion of cost reductions and productivity gains in the current half and next year, comprising an $800 million reduction in operating costs, $400 million worth of productivity gains, and $300 million in indirect costs.
The company will also target additional capital expenditure reductions of up to $1 billion by the end of 2016.
Cutifani said the company’s transformation was progressing, despite external challenges, and he expected a further $1.2 billion in EBIT upside over the next 18 months.
He said now was the right time to accelerate the “right-sizing” of the business, which would comprise asset sales and the reduction of 6000 overhead and indirect roles, including staff who were transferred to new owners due to divestments.
“Post asset sales, we expect to have reduced our number of assets from 55 to 40 and reduced total employees by 35%, while maintaining copper equivalent production,” Cutifani said.
“As a result, and following the asset disposals and further business improvement, our underlying EBITDA margin of 25% in the first half of 2015 would increase to 35% on a like for like basis, representing a 40% improvement off a substantially lower cost base.”
The company is targeting divestments of $3 billion, including the $1.6 billion already received from the sale of its 50% stake in Lafarge Tarmac.
Net debt at June 30 was $13.5 billion, but has subsequently dropped to $11.9 billion after the sale of Lafarge Tarmac, putting the company on track to reach its long-term target of $10 billion.
“Looking to the balance of this year and into next, I expect the current period of volatile markets and economic uncertainty, fuelled in part by pockets of geopolitical tension, to continue,” Cutifani said.
“We are making fundamental changes to transform Anglo American – operationally, structurally and culturally – into a fit for purpose organisation with an enhanced resource endowment.
“Combined with our diversified strategy across the early, mid and late cycle demand segments, we are ensuring that the business is sustainable through the commodity price cycles, as well as shorter-term price shocks, and offers investors attractive and differentiated exposure to the mining industry.”
