Anglo American recently announced its establishment of a commodities trading division. According to Mining contributor Frik Els, the new sector will add $400 million to the company's annual profit levels within the next two years.
Financial Times commodity editor Neil Hume noted that many within the mining sector have avoided such activities, as the market can quickly shift and be unpredictable, and such strategies require substantial working capital commitments.
However, Anglo decided to take the road less traveled in the industry to ensure the success of its new commercial unit. Hume stated that the company consolidated nine export and marketing offices in two regions. The organization also reviewed sales activities to boost earnings and optimize its assets and operations to establish the new trading division.
The $400 million goal will come as a result of selling the company's output more effectively, including its supplies of coal, platinum and iron ore.
Els also noted that the company has implemented new strategies since new CEO Mark Cutifani took over the business in 2013, including efforts to differentiate the business from others in the industry.
"In Anglo American there is a broadly diversified mining company with a strong focus on operating performance and a big opportunity to improve on that," Cutifani said. "We and Glencore Xstrata are the only two truly diversified resource companies."
Before a mining group can branch out the way Anglo has, they must ensure that their primary business is functioning effectively. These groups should implement equipment condition monitoring technology, which can boost equipment reliability and prevent unplanned downtime. Furthermore, these systems provide the means for preventive maintenance, which can prolong the service life of key machinery. With this technology in place, administrators can rest easy about the core component of their business and focus on other mission-critical pursuits.