London - Global miner Anglo American [JSE:AGL], in the first set of earnings released under its new chief executive, vowed to slash spending and boost cash flow by $1.3bn a year by 2016 as it reported a 15% drop in first-half profit.
CEO Mark Cutifani, a one-time miner and engineer who joined from AngloGold in April, delivered his plan for the underperforming mining giant alongside half year results which showed underlying operating profit fell to $3.3bn.
Analysts welcomed a shake-up that streamlined Anglo's corporate structure, cut 2013 spending by $1bn and promised annual cost cuts of $800m - through both overhead savings and by reducing spending on early stage projects by a third.
"It is not about wholesale or radical changes at the operating level, but it is about introducing a much more disciplined approach to planning, to execution and delivery on the objectives we have," Cutifani said on Friday.
Anglo, the smallest of the major miners, has underperformed its peers for much of the past decade, most recently battling labour unrest in South Africa, where it still generates half its earnings, and multi-billion dollar cost overruns in Brazil.
Anglo now targets a cash flow boost of $1.3bn a year by 2016 and aims to lift its return on capital employed (ROCE) - a measure of the value a company gets from its assets - to 15%, from 11% in the first half.
That will come not just from cost cuts but from boosting profit it makes from marketing its minerals, from reducing its pipeline of projects - thereby cutting the number of operations that are not generating cash - and improving working mines.
"Our performance at the operating level, compared to our budgets, has been unacceptably poor," Cutifani told reporters.
"Over the last eight (quarters) only 11% of operations are delivering consistently against their targets - we have to up that."
Anglo's shares climbed in early trade and were changing hands at 1 409 pence by 09:14 GMT - up 1.6% on the day against a flat FTSE 100. Traders cited caution on what were seen as ambitious targets.
Assets sales
Analysts welcomed the plans and the increased focus on elements like marketing profit - where Cutifani said he aims to emulate Glencore's Ivan Glasenberg. Most, though, said they needed results and more detail on Anglo's two biggest headaches, the $8.8bn Minas Rio iron ore project in Brazil and Anglo American Platinum, which has been crippled by strikes and falling prices.
"There has been good progress on the cost cutting. The key issue going forward will be to see that is realised," analyst Paul Gait at Sanford Bernstein said.
Cutifani said he planned to slash a $17bn project pipeline - much vaunted by the previous management - and would also consider "opportunistic" asset sales. He confirmed the group had begun a process to search for a partner at Minas Rio.
He has also already sought to simplify Anglo's structure, announcing plans to reduce 10 business units to 6 - undoing some of the changes brought in by previous chief executive Cynthia Carroll - to create a more manageable structure. That will involve merging thermal and metallurgical coal and base metals.
Cutifani also brought in his former right-hand man at AngloGold, Tony O'Neill, who joins Anglo as group director responsible for - among other things - mining technology, business performance, asset optimisation and projects.
Anglo, the first of the diversified majors to publish results, said underlying operating profit fell in the six months to $3.3bn, ahead of a consensus estimate of $3.12bn. Underlying earnings per share (EPS) came to $0.98.