At the end of 2015, mega miners Anglo American (AAL) and Glencore (GLEN) were in a bind. With commodity prices crumbling, their leverage ratios were unsustainably high and their balance sheets needed reshaping. The easy first step was to cut the dividend, but the trickier second act was to dispose of assets at something approaching good prices. Given the dour outlook for commodities at the start of this year, few were betting that a rapid divestment programme could lead to a rebound in either of the companies' fortunes (and equity prices). But as the chart below shows, that is almost precisely what has happened.
This week Glencore hit its debt reduction target for the year after agreeing to sell its Australian rail division for A$1.14bn (£718m) to operator Genesee & Wyoming. The deal is the commodity giant's fifth major sale in 2016, following the two-part sell-off of half its agriculture business, and two royalty deals. A year ago Glencore chief executive Ivan Glasenberg wanted net debt to fall to between $16.5bn and $17.5bn by the end of December, representing a multiple of less than two times adjusted cash profit.