Anglo-American Cutting Two-Thirds Workforce
One of the world’s largest mining companies announced Thursday it would cut 85,000 jobs, or two-thirds of its workforce, as lowering commodity prices cut into corporate profit.
Shares in Anglo-American ended down by more than 11-percent on the news.
The London-listed company, which has vast production facilities across Africa, said it would also sell huge chunks of its business and suspend dividend payments for a year. Capital expenditures will also be cut by US$1 billion.
The company said it would be selling or closing down up to 35 of its mines.
The collapse in prices for gold, copper, and iron ore has slashed profits at the firm. It marks the most aggressive restructuring since the economic crisis of 2008.
Perhaps hardest hit in the downsizing will be South Africa. The country counts for almost half of Anglo-American’s revenues within its global portfolio. Within the private sector, the mines in South Africa count for more than a half a million jobs alone.
Anglo-American is the largest producer of platinum. South Africa counts for 80-percent of the world’s platinum production.
South Africa has had its own problems with protracted and violent strikes, which particularly hit platinum production. Some 5,000 mining jobs in South Africa are already being renegotiated through retrenchment packages, cuts, and shaft shutdowns.
While there were some hints that a restructuring of Anglo-American would take place, the timing has come as a surprise to many. Stock holders had been putting pressure on CEO Mark Cutefani to do something to hold onto cash.
Anglo-American is not the only mining company suffering from the downturn in commodity prices. Glencorp, located in neighboring Zambia, has been exposed to the phenomenal downturn in the price of copper, which has impacted their ability to restructure and payback their debts. The company announced on Friday it would sell its troubled South African coal mine to its main customer, power utility Eskom, for US$135 million. That is less than the cost of production.
The Anglo-Australian miner, Rio-Tinto, is also talking about cutting back on its growth plans.
At the core of the problem is the slowing down of the Chinese economy, which accounts for 40-50 percent of global commodity demand. Continuing weak Chinese data has fueled concerns of a slumping worldwide economy.