Anglo American swings back to profit and retreats on disposal plan

Anglo American boss Mark Cutifani has defended a change in the company's strategy, after rowing back from a dramatic plan outlined at the end of 2015 to shrink the business by almost two-thirds in order to survive a downturn in commodity prices.

The FTSE 100 giant has said it will now hold on to coal and iron ore mines it had previously earmarked for sale, having slashed its huge debt pile faster than expected. 

"There's no doubt we've pivoted back from where we were," Mr Cutifani said. "It was the right call 18 months ago - people were supportive at the time. But a big investor said to me, we want to see a company with a clear strategy, and when there's a change in circumstances, it can be flexible enough to change that strategy. And that's what we've done."

Falling prices and a large debt pile almost brought the mining group to its knees in 2015. But rising metal prices last year saw it rake in cash from iron ore, used in steel, and coal - two commodities it had vowed to exit in order to focus on diamonds, copper and platinum.

Net debt fell from $12.9bn to $8.4bn at the end of December, well below its target of $10bn, thus easing the pressure on its balance sheet.

The improved performance meant that Anglo, which celebrates its 100th anniversary this year, made a pre-tax profit of $1.59bn (£1.28bn) in the year to December 31, from a loss of $5.6bn a year earlier. This marked its first annual profit in five years.

Underlying earnings before interest, tax and other charges jumped 25pc to $6bn, while revenue edged up 1pc to $23.1bn.

Unlike its peers in the mining sector, which have announced a return to shareholder payouts after stopping them during the downturn, Anglo ruled out a dividend this year. Payouts will now resume for the 2017 financial year. 

Mr Cutifani insisted that Anglo's future still lay with the commodities in which it has a world-class presence - such as diamonds, through its De Beers subsidiary; platinum, used in catalytic converters; and copper, which is used in electronics and housebuilding. 

"Our commitment to those three commodities is even stronger today - they really remain central to what we're doing," he said. 

Nonetheless Anglo's underlying earnings from coal and iron ore last year exceeded what it made from diamonds, platinum and copper put together.

Anglo would "keep the door open" to discussions about divesting a handful of large mines in South Africa - its historic home, which has been beset by upheaval in the mining industry - but Mr Cutifani admitted that the miner was likely to hold on to its Kumba iron ore business. "We're happy to be a player in South Africa for the longer term," he said.