Mining company Anglo American has announced to cut 85,000 jobs over the next several years as a result of reduced profits amid plunging commodity prices.

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Image: Anglo American CEO Mark Cutifani. Photo: courtesy of Anglo American.

The company said that the reduction of workforce is a part of its radical portfolio restructuring program aimed at focusing on its core assets and create a more resilient business.

In order to protect the balance sheet and ensure optimal efficiency and effectiveness, the firm also plans $3.7bn of cost and productivity improvements from 2013 to 2017.

As part of this effort, a further $1bn capex is planned to be reduced by the company by the end of 2016.

Anglo American also targets to reduce capex in 2017 to $2.5bn, which represents a 55% reduction when compared with 2014 expenditure.

Anglo American CEO Mark Cutifani said: “Together with the additional material capital, cost saving and productivity measures announced today, we are setting out an accelerated and more aggressive strategic restructuring of the portfolio to focus it around our ‘Priority 1’ assets, being those assets that are best placed to deliver free cash-flow through the cycle and that constitute the core long-term value proposition of Anglo American.”

The firm also plans to consolidate its six business unit structures into three businesses including De Beers, Industrial Metals and Bulk Commodities in order to reduce the cost burden.

Cutifani added: “While we have continued to deliver our business restructuring and performance objectives across the board, the severity of commodity price deterioration requires bolder action.

“We will set out the detail of the future portfolio in February, with the aim of delivering a resilient Anglo American and a step change in the transformation of the Company”.

Due to weaker prices and asset closures, the firm estimates impairment charges of $3.7bn-$4.7bn.

However, the firm targets $3.7bn in efficiency improvements by the end of 2017.

The company has raised its asset disposal target to $4bn including sale of the Phosphates and Niobium businesses during 2016.