Anglo hits 4th straight loss ($5.6bn). Jumps coal ship, seeks to offload Kumba.

It’s already been said once today but how the mighty Anglo American has fallen. Prior to the results presentation, Moody’s Investor Services downgraded the group’s debt to ‘junk’. And things didn’t get any easier as the results were released. The group’s losses doubled to $5.62 billion and will accelerates the exit from its coal assets, and may look to spin off its South African iron ore division Kumba. The group is moving away from bulk commodities into diamond, platinum and copper. Anglo is also in danger of being booted from the London FTSE 100, following a staggering 68% fall in the stock price in 2015. And the problems keep compounding. CEO Mark Cutifani was drafted in 2013 to help turn a sinking ship but there are questions circling asking if anyone is able to steer the group to safety, as it’s now four years of straight losses. Alec quoted Warren Buffett’s warning yesterday – “when the reputation of a good manager comes up against a bad company, it’s the company which tends to win.” Truer words may not be spoken. – Stuart Lowman

By Thomas Biesheuvel and Jesse Riseborough

(Bloomberg) — Anglo American Plc said it will sell even more mines, with disposals reaching as much as $6 billion, and raised its debt-reduction plan after a fourth year of losses raised questions about the company’s survival.

The company, which reported that losses doubled to $5.62 billion in 2015, will accelerate its exit from coal and may sell or spin off its South African iron-ore division. Anglo is moving away from bulk commodities to focus on materials, such as diamonds, platinum and copper. It wants to cut net debt to less than $10 billion by the end of the year from $12.9 billion, according to a statement released Tuesday.

Anglo_American_Building_JHB
Anglo American’s South African headquarters, Marshalltown, Johannesburg

The stock climbed 6.1 percent to 417 pence as of 8:06 a.m. in London. Speculation that the worst is over sent Anglo’s shares up almost 80 percent over the last three weeks.

Anglo, with mines around the world producing everything from diamonds to iron ore and nickel, lost three-quarters of its market value last year as it struggled with billions in debt and metal prices at six-year lows. Its credit rating was cut to junk yesterday by Moody’s Investors Service, making it the first major London-traded miner to be reduced to that level. To preserve cash, Anglo has promised to reduce the number of mines it owns, cut staffing and stop paying a dividend.

Challenging Environment

“We of course recognise the current challenging environment in which to deliver disposals,” Chief Executive Officer Mark Cutifani said today in the statement. “While we have accelerated our disposal processes, and given our targeted positive free cash flow and our robust liquidity position, we will take appropriate time to secure value.”

Excluding some items, Anglo earned 64 cents a share, compared with $1.73 a share in 2014. The average estimate from a Bloomberg survey of analysts was 63 cents a share. Full-year sales fell 26 percent to $23 billion.

In the medium term, the company said it wants to reduce its debt to $6 billion, about half the current level, and return to an investment-grade rating. The Moody’s downgrade has no impact on the business, Chief Financial Officer Rene Medori said on a call after the results were announced.

The company has initiated a review to consider options to exit its Kumba iron-ore business in South Africa “at the appropriate time, including a potential spin-out,” it said. Anglo added its Moranbah and Grosvenor coal mines in Australia to the list of assets on offer, accelerating its withdraw from bulk commodities. The company also said its nickel business was for sale.

Anglo is confident that it can sell all its Australian coal assets at a good value and there’s interest in its coking coal assets, Cutifani said. There’s no doubt that the company can deliver $3 billion to $4 billion in asset sales in 2016, he said.