Anglo’s radical downsizing signals lasting mining slump – by Ian McGugan (Globe and Mail – December 9, 2015)

http://www.theglobeandmail.com/

Anglo American PLC, one of the world’s biggest miners, is planning to shrink by nearly two-thirds and shed 85,000 jobs as it attempts to deal with a global commodity slump that has entered a new and vicious stage.

While other miners have trimmed jobs, reorganized themselves and put assets up for sale, Anglo is the first of the world’s leading producers to commit itself to radical downsizing – a sign that it does not see any realistic hope for a near-term rebound in metal prices.

The British company’s willingness to do what was once unthinkable highlights the urgency of the challenges facing global miners. Metal producers borrowed, built and expanded during the commodity supercycle that ended in 2011 only to tumble into a subsequent slump that has erased all the gains made during the boom times.

The Bloomberg World Mining Index, a benchmark for global metal and minerals producers, is now back at the level it first touched in 2003, just as the supercycle was picking up momentum.

Anglo’s plan to shrink itself to a core group of operations reflects the growing conviction that commodity prices will not rebound any time soon. “Our view [is] that this downturn will be long-lasting,” Moody’s Investors Service wrote in a report last week in which the credit rater called attention to the commodity sectors’ $1.9-trillion (U.S.) in bond issuance over the past five years, and the deteriorating financial fundamentals behind that borrowing.

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