Anglo American Plc has overtaken Glencore Plc in a race neither wants to win.
Radical cuts across Anglo American’s operations that Chief Executive Officer Mark Cutifani says are aimed at delivering a “resilient” business, have so far turned the company into the year’s worst performer on the FTSE 100 index of major U.K. shares.
“Alarm bells will be ringing at Anglo headquarters this morning,” Yuen Low, a mining analyst at Shore Capital Stockbrokers Ltd., said in London. “They have taken drastic action but it may not be enough.”
Anglo has sunk 73 percent this year, slightly worse than Glencore’s 72 percent drop. While the broader industry has tumbled this year in the face of a Chinese economic slowdown, the two producers’ debt piles have drawn the greatest concerns among investors.
Anglo fell as much as 14 percent in London on Wednesday to a record low before paring losses to close 1.2 percent lower. Yesterday, the stock fell 12 percent, the most since 2009, after the company accelerated turnaround plans to include 85,000 job cuts and scrapped its dividend.
“The downside risk to commodity prices is still significant, and further action, including an equity issuance, may still be necessary in 2016,” Jefferies LLC said in a note to investors Wednesday. “We have confidence that operational improvements are coming, but we do not have confidence that commodity prices will stabilize in the near future.”
Jefferies cut its rating on Anglo to sell from hold. Banks including HSBC Holdings Plc said even the extended cutbacks may be insufficient should weak commodity prices prevail.
Glencore, weighed down by a $30 billion debt load, has edged higher from a record low on Sept. 28 after the company moved to alleviate investor concerns about its ability to curb its borrowings. The commodity trader has sold $2.5 billion of new stock, scrapped its dividends and put assets up for sale as part of a $10 billion debt-reduction plan.
Glencore gained 4.6 percent to close at 83.08 pence on Wednesday. The 13-member FTSE 350 Mining Index advanced 3.2 percent.