Anglo American has suspended its dividend and announced plans to cut its workforce by more than 85,000 as mining firms react to the plunging price of iron ore and other metals.

The UK miner said it would not pay a dividend for the second half of this year and all of next year. The last time Anglo American cut its dividend was during the worst of the financial crisis in 2009.

In a presentation to investors, Anglo American said it would reduce its number of mines from 55 to about 20 and cut employee numbers from 135,000 to less than 50,000 after 2017. It will halve the number of business units from six to three: the De Beers diamond operation, industrial metals and bulk commodities.

The company, which mines iron ore, manganese, coal, copper and nickel, said it would cut capital spending by a further $1 billion to the end of 2016, taking the reduction in capital spending to $2.9 billion by the end of 2017. It increased the amount it plans to raise from asset sales to $4 billion from $3 billion.

Anglo American’s shares fell as much as 9 per cent to a new all-time low of 335p. Its announcement sent all other mining shares down in London with the sector at a 10-year low.

Mark Cutifani, chief executive of Anglo American, 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 one assets.

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

The biggest mining companies are slashing spending and cutting costs to protect their financial strength as prices of metals plunge. The price of iron ore has plunged by almost 40 per cent this year as demand from China has fallen. The price fell 1 per cent on Tuesday to $39.06 a metric ton, down from $191.70 in 2011.

– (Guardian news service)