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Anglo American examines iron ore unit sale after earnings plunge

Anglo American to sell Kumba Iron Ore
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Anglo American to sell Kumba Iron Ore

Miner Anglo American on Tuesday posted a full-year net loss and announced plans to sell assets including Kumba Iron Ore as commodity prices slump.

"We've got a couple of options (for the Kumba sale), whether we do a sell down or in fact do a spin-off," CEO Marc Cutifani told CNBC in an interview. He said the group was a smaller player in iron ore and wanted to focus on diamonds, platinum and copper.

"It's about focusing on consumer-based commodities," he said.

Shares in the group opened up over 6 percent, but was down 7 percent by mid-morning trade.

"At the end of the day, we have to make some tough calls," Cutifani told CNBC.

A slowdown in the Chinese economy has hit the mining industry hard. On Monday, ratings agency Moody's cut Anglo's debt rating to junk, citing a deterioration in commodities market conditions.

Cutifani defended the group's position, telling CNBC it had bids on the table for a number of its assets. Moody's "may have to re-think" its announcement in the next months, he said.

The net loss for 2015 came in at $5.62 billion. Underlying profit before interest and tax came in at $2.2 billion from $4.9 billion last year, a 55 percent drop.

The group is planning to raise $3 to $4 billion from disposals in 2016.

"We of course recognize 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," said Cutifani, in a company statement.

The group will continue to focus on diamonds through its De Beers business. Cutifani said the group was "cautious" and added it may take another two to three months before he could comfortably say the market had turned.

Too early to call the bottom: Anglo American CEO
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Too early to call the bottom: Anglo American CEO

On commodity prices as a whole, Cutifani said it was too early to call the bottom after a 20 percent reduction seen in the last 12 months. He was confident however that the group was "in the right place" and having "the right conversations".

In December, Cutifani signaled the group planned some 85,000 jobs cuts. Tuesday, he said the figure was very similar.

"What we've done is we said we'd be down to around 135,000 by the end of 2015 - we're actually down to 128,000 - we will end up with about 50,000 people in the core but I do have to remind you that 68,000 of the 78,000 reductions to go, go with assets. So they don't lose their jobs, and we're talking about 10,000 in the restructuring of our assets in getting our costs down," Cutifani told CNBC.

The problems facing Anglo American
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The problems facing Anglo American

Paul Renken, senior geologist and mining analyst with VSA Capital, told CNBC Tuesday that shareholders have expressed concern over the slow progress of restructuring at Anglo American.

"Mark Cutifani has a lot of work to do here," said Renken, to CNBC.

"Frankly, Anglo American is slower than the other big iron and coal producers in taking these particular actions and as a result they haven't been cost cutting and otherwise rationalizing the business as quickly as the other big businesses," said Renken.


Answering the criticisms, Cutifani told CNBC, "I'll let the numbers do the talking. In the last two years, safety is down 60 percent, environmental incidents is down 70 percent, productivity is up 27 percent, costs are down 27 percent, and we've taken out 30 percent of the assets in the last two years in terms of the restructuring. A lot more to do, lot more to do in 2016, this is the important year, and we've certainly accelerated in the last 18-months."

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