Anglo American teeters on the brink

The world's number five diversified mining company, Anglo American announced a "radical portfolio restructuring" a month ago. The company with roots going back more than a hundred years to South Africa's gold and diamond fields said it would cut around 85,000 employees, almost two-thirds of its workforce.

London-listed Anglo also said it's reducing the number of mines it operates from 55 to the "low 20s". According to CEO Mark Cutifani  Anglo would focus on diamonds, copper and platinum because of better long-term potential.  Only cash-producing (good luck with that) nickel, coal and iron ore assets will be kept in its portfolio.

The continuing rout in metals prices, renewed weakness in iron ore and a darkening outlook for diamonds (once Anglo's secret diversification weapon) are convincing investors – already unhappy about slashed dividends – even these cutbacks may not be enough.

Anglo's ADRs (OTCMKTS:NGLOY) trading in New York plummeted more than 10% on Thursday. The counter is now trading an eye-watering 80% below its level a year ago, falling to less than $5 billion in market cap. Debt is in the region of $13 billion.

In a curious bit of pre-emption Anglo's largest shareholder, South Africa's Public Investment Corporation which manages state pensions and owns 9% of the company, warned management on Thursday not come looking for more cash.

“The board and management of any company should first explore all cost-cutting options available to it in order to ensure the future of the company, before engaging with shareholders for a financial injection to salvage the company,” PIC said in an e-mailed statement quoted by Bloomberg.

Cutifani has vowed not to tap shareholders for an injection, but judging by today’s sell-off where Anglo was once again the worst performer in a pretty dismal field, investors are betting deeper discounts on the share may be in the offing.

Apart from a sudden rebound in commodity prices (aka divine intervention) and barring extending a begging bowl, how can Anglo feasibly recover?

The company has already learned that the first cut isn't always the deepest. But anything more radical than what is already underway would begin to look a lot like a break-up of one of mining’s marquee names.