Anglo American (AAL.L) Chief Executive Duncan Wanblad hasn’t had a great year. Shares in the $34 billion miner are off 36% this year, underperforming rivals like Glencore (GLEN.L) and Rio Tinto (RIO.L), (RIO.AX). Wanblad’s effort on Friday to cut costs in less profitable areas and spend on future projects is therefore sensible – if incomplete.
Wanblad’s plan will lower capital expenditure by $1.8 billion between 2023 and 2026, and reduce costs by up to $1 billion next year. Anglo could use the headroom. It is spending billions of dollars to develop a massive project in the north of England to produce polyhalite, a lower-carbon fertiliser product, even though the scheme won’t make money until 2027.
There are two issues. Investors didn’t like news of lower production across the group, including iron ore and copper in South Africa and Chile, and hence sent the shares down 9%. Meanwhile, Anglo’s low-carbon future is offset by its continued exposure to coking coal. True, the mineral remains irreplaceable in the steelmaking process and last year coal generated 19% of group EBITDA. But as banks increasingly shut out coal clients, selling now might be a way to free up more resources – and allow Anglo to cash out before coal asset values plummet. (By Karen Kwok)
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