Mining’s Poster Child of Pain Can Talk About Growth Again
Mining’s Poster Child of Pain Can Talk About Growth Again
(Bloomberg) -- Among the mining giants, perhaps none suffered more than Anglo American Plc during the commodities crisis. After a year of overhauling the business, growth is now on the horizon.
Anglo, which releases results later this month, is expected to report the first profit increase in five years on the back of surging commodity prices and deep cost cuts. Chief Executive Officer Mark Cutifani says the company will likely pay a dividend next year and may consider expanding through deals in the future.
“Make no mistake, we are not the company we were,” he said at the Mining Indaba conference in Cape Town, South Africa.
Under Cutifani’s leadership during the downturn, Anglo paid down debt, sold assets and scrapped the dividend in an effort to become a leaner, more resilient company. And investors are buying the turnaround story, with the shares rallying almost 300 percent in 2016.
The stock advanced 0.5 percent to 1,336 pence as of 8:08 a.m. in London.
Now that the company’s balance sheet has stabilized and confidence is turning to the mining industry, Cutifani’s priority is shifting to resuming dividend payments.
“We’re not committing to big growth until we start returning money to shareholders,” he said in an interview.
Profit Outlook
The company is expected to earn $1.42 a share in adjusted profit for 2016, more than double the income last year, according to data compiled by Bloomberg. That extra cash is helping Anglo plan for future growth, which may include mergers and acquisitions.
“We’ve never stopped looking” for deals, Cutifani said.
In recent years, the company has tried to sell mines, rather than buy them. It was burned by past transactions, such as the $14 billion Minas Rio iron ore project in Brazil, which turned out to be expensive and poorly timed. Anglo would only pursue “sensible” deals and be disciplined in its approach, the CEO said.
The company plans to retain its focus on diamonds, platinum and copper. Anglo is already the world’s biggest diamond and platinum producer through its De Beers and Anglo American Platinum Ltd. units.
For the mining industry overall, the “new normal” is an environment of increased volatility, where pricing isn’t necessarily driven by supply and demand, Cutifani said. Anglo’s productivity has improved about 40 percent since 2012 and unit costs are about one-third lower, he added.
“As some industry commentators remarked, we were trying to shrink ourselves to success,” Cutifani said. “They didn’t get it. What we were doing was upgrading the quality of our portfolio, shrinking our cost base, and transforming the contribution from our larger scale and more productive assets.”
To contact the reporters on this story: Thomas Biesheuvel in London at tbiesheuvel@bloomberg.net, Lynn Thomasson in London at lthomasson@bloomberg.net. To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net.