Anglo American is in a hole and it needs to stop digging. The mining giant, which reported a 41% drop in annual profit on Thursday, has launched a sweeping review of its portfolio and may sell or spin off some of its assets. But its problems run deeper than a few underperforming businesses. It needs to overhaul its capital allocation to regain investor confidence and compete with its more disciplined rivals.

The miner, which has a market value of $36bn, has been hit hard by the slump in prices and demand for platinum group metals (PGMs) and diamonds — two of its core commodities. It wrote down the value of its De Beers diamond unit by $1.6bn, reflecting the impact of a weak global economy on the luxury market. Its PGM division, which includes the troubled SA platinum mines operated by Anglo American Platinum (Amplats), saw its revenue and its core profit, or earnings before interest, tax, depreciation and amortisation (ebitda) plunge. ..

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