Anglo American’s Shares Plunge to All-Time Low – by Scott Patterson and Alex MacDonald (Wall Street Journal – December 7, 2015)

http://www.wsj.com/

LONDON— Anglo American PLC’s shares tumbled to a new all-time low on Monday, reflecting the harsh verdict by investors on a business model the U.K. company and other big miners have long pursued: Digging up a diverse range of materials.

The idea behind diversification is simple. Miners that produce and sell a broad range of commodities said they could perform better in a downturn than miners with a narrow basket, as strong performance by some commodities could balance out a poor showing by others.

Anglo is among the most diversified miners, with earnings before interest and taxes spread among iron ore and manganese (27%), coal (14%), copper (9%), diamonds (31%) and platinum (14%) in the first half of 2015.

The problem: In the latest downswing, nearly all commodities have slid amid softening demand by their biggest consumer, China. Iron-ore prices traded Monday at about $39 a ton, according to the Steel Index, down from highs of more than $191 a ton in 2011; copper fell 0.3% early Monday and is down about 27% on the year.

“What you tend to find in most crises is that correlations [between commodities] move one way and everything craps out together,” said Sanford C. Bernstein analyst Paul Gait, a former Anglo executive who still advises buying the company’s stock because of its large reserves of commodities such as copper.

Anglo’s shares have plunged nearly 70% this year, closing at £3.69 ($5.57) on Monday in London, down 1.9% to the lowest level since the company went public in 1999.

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