Anglo American: Strategic Focus on world-class Assets and sustainable positive free Cash Flow

Asset portfolio

  • World class core portfolio of assets in diamonds, PGMs and copper
  • Competitive asset base to deliver sustainably positive free cash flow through the cycle
  • Bulk commodities and other minerals to be managed for cash generation or disposal



2016 targets

  • Free cash flow positive at current prices
  • $1.9 billion EBIT benefit from additional cost and productivity improvements vs. 2015
  • $3-4 billion targeted from disposals in 2016
  • Net debt expected to be less than $10 billion (pro forma) by end of 2016

Medium term targets

  • Net debt : EBITDA of less than 2.5x
  • Net debt of c.$6 billion, via disposals and positive free cash flows
  • Return to solid investment grade credit rating

Anglo American plc ("Anglo American" or "the Group" or "the Company") announces detailed and wide-ranging measures that will sustainably improve cash flows and materially reduce net debt, while focusing the Group on its core portfolio of world-class diamond, platinum group metals (PGMs) and copper assets. Anglo American will focus on competitive, long life assets with considerable organic growth opportunities that mine consumer-driven materials that are expected to benefit from long term growth trends as the global economy evolves and developing economies mature. These measures continue the transformation of the Company to create the new Anglo American, positioned to deliver robust profitability and cash flows through the price cycle.

Focus on De Beers, PGMs and copper

  • Materially streamlined core portfolio of 16 assets
  • Improved competitive profile – advantaged cost positions, world class ore bodies and balance of geographic and end markets
  • Asset quality, mineral endowment options and scale to support future opportunities
  • Differentiated, premium positioning for expanding consumer product-based markets

Portfolio transformation under way

  • Nickel, Niobium and Phosphates, and Moranbah and Grosvenor metallurgical coal disposal processes under way
  • Further progress made on other previously announced disposal processes, including certain platinum and thermal and metallurgical coal operations in South Africa and Australia
  • Cash flow enhancements further strengthen balance sheet
  • $1.9 billion of cost and productivity improvements in 2016, expected to continue into 2017 and beyond as the organisation is aligned with streamlined portfolio
  • Step-change 50% ($250 million) central and global support cost reduction in medium term
  • 25% year-on-year reduction in total capex expected, to less than $3.0 billion in 2016
  • Dividend suspended and will resume with payout ratio when appropriate
  • Strong liquidity maintained with c.$15 billion of cash and undrawn facilities

Mark Cutifani, Chief Executive of Anglo American, said "We are taking decisive action to sustainably improve our cash flows and materially reduce net debt, while focusing on our most competitive assets.

"We have detailed a series of measures, including $1.9 billion of additional EBIT benefits from cost and productivity improvements to deliver positive free cash flow in 2016 and beyond, and an additional $3-4 billion in asset disposal proceeds. As a result, we are targeting net debt of less than $10 billion in 2016, assuming current commodity prices and exchange rates. In the medium term, we are targeting net debt of $6 billion, supporting a return to a solid investment grade credit rating.

"We of course recognise the current challenging environment in which to deliver disposals. We are already engaged with parties interested in several of our assets, but we will only complete those transactions which deliver appropriate value for our investors. So, 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 outcomes from the disposal programme.

"Our core portfolio creates a highly attractive, competitive and well balanced business, with the leverage of scale, technical expertise and mineral endowment options, which offer considerable upside potential over the long term. By taking such action, we create a Group that will also be significantly stronger in the short term – it will be streamlined, focused, with lower overhead and indirect costs and positioned to deliver robust profitability and cash flows through the cycle.

"We will focus our portfolio on our global leadership positions in diamonds and platinum group metals and our world-class position in copper. This unique combination of assets, enhanced by our commercial marketing expertise, will have the advantage of benefiting from the ongoing shift away from infrastructure investment towards consumer-driven demand, positioning Anglo American for these expanding markets. We will manage our other assets, in bulk commodities and other minerals, for cash generation or disposal over time.

"This is a period of considerable change in Anglo American's long history of evolution and I appreciate the support of all our employees and stakeholders in helping to deliver the sustainable value that we all demand and expect. We are creating the new Anglo American."

Source: Anglo American

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