RIO Rio Tinto Plc

LONDON—Anglo American PLC's shares tumbled to a new all-time low on Monday, reflecting the harsh verdict by investors on a business model the U.K. company and other big miners have long pursued: Digging up a diverse range of materials.

The idea behind diversification is simple. Miners that produce and sell a broad range of commodities said they could perform better in a downturn than miners with a narrow basket, as strong performance by some commodities could balance out a poor showing by others.

Anglo is among the most diversified miners, with earnings before interest and taxes spread among iron ore and manganese (27%), coal (14%), copper (9%), diamonds (31%) and platinum (14%) in the first half of 2015.

The problem: In the latest downswing, nearly all commodities have slid amid softening demand by their biggest consumer, China. Iron-ore prices traded Monday at $39 a ton, according to the Steel Index, down from highs of more than $190 a ton on Feb 17, in 2011; copper rose 2.5% early Monday but remains down about 25% on the year.

"What you tend to find in most crises is that correlations [between commodities] move one way and everything craps out together," said Sanford C. Bernstein analyst Paul Gait, a former Anglo executive who still advises buying the company's stock because of its large reserves of commodities such as copper.

Anglo's shares have plunged nearly 70% this year, falling to £ 3.70 ($5.59) on Monday morning in London trading, the lowest since the company went public in 1999, before recovering slightly.

Now Anglo is moving to fortify its balance sheet amid the rout in commodities, looking to sell off assets and cut costs. The Wall Street Journal reported Thursday that Anglo, the fifth biggest miner by market valuation, plans to slash its dividend, a move it could announce Tuesday at its "investor day," or early next year, people familiar with the decision said. The company also says it is cutting 53,000 jobs—a third of its workforce—over the next few years.

Glencore PLC, which in September said it would suspend its dividend, has also touted its diversified earnings engine, which includes its trading arm and a mining division exposed to copper, coal, zinc and aluminum, among other commodities. Glencore executives said the firm's trading business would generate solid profits no matter which direction the market was moving, giving it a cushion during hard times.

But investors revolted against the model this year as the high debt load carried by its trading arm, on top of the mining division's debt, sparked concerns that Glencore would get hit with crippling credit-rating downgrades as commodity prices tumbled. Glencore's share price has fallen nearly 71% this year.

Mining giants BHP Billiton Ltd. and Rio Tinto PLC, who are far more exposed to a single commodity—iron ore—have performed far better than their more diversified competitors. Iron ore accounts for nearly 60% of adjusted earnings at Rio and BHP. The companies have been able to weather a sharp downdraft in iron ore prices because their mines run at far lower costs than competitors, including Anglo.

Anglo spokesman James Wyatt-Tilby defended the company's strategy, noting that various commodities have swung lower with "differing timing over the last two years." "We expect different sequencing on the way back up," including a swifter rebound in base metals than bulk commodities, Mr. Wyatt-Tilby said.

No big miner has talked up the benefits of diversification more than Anglo. Its chief executive, Mark Cutifani, in February said that in 2014 its "diversified product portfolio provided us with a degree of insulation from the particularly sharp price fall" in commodities.

Then, the argument made some sense. Anglo's majority-owned De Beers unit, which produces about one-third of the world's "rough" diamonds, posted an 11% gain in revenue to $7.1 billion in 2014 from the previous year on strengthening U.S. demand. That helped offset poor performance at its iron ore and coal mines.

But diamonds have been a disappointment this year amid lackluster demand and falling prices.

Some investors think Anglo's business model could still work out. James Henderson of Henderson Global Investors Ltd., a London money manager that owns 2.3 million shares of Anglo, said he thinks the market isn't appropriately valuing De Beers. He said he has been scooping up Anglo shares recently.

"I think this is an opportunity," he said. "I think their balance sheet is OK for them to toughen it out for the next two to three years. It's just hard work."

Other investors are more glum.

"The bottom line is that most commodities tend to move together most of the time," said Nik Stanojevic, an equity analyst at Brewin Dolphin Ltd., a $45 -billion private wealth manager. If a company is a low-cost producer, "you'll make money no matter what the commodity price...[but] Anglo American is not the lowest-cost producer in many of its commodities."

Mr. Stanojevic has advised his fund managers to sell Anglo's stock for the past five years, pointing to the company's elevated cost of insuring its debt against default as a sign. Anglo had net debt of $13.5 billion as of the end of June, or $11.9 billion on the closure of the sale of its stake in Lafarge Tarmac Holdings Ltd. buildings-material joint venture in July.

"For Anglo, the problem is that the balance sheet of the company has become weak," said Yohan Salleron, a fund manager at Paris-based Mandarine Gestion which owns about $23 million worth of Anglo stock.

The diversified mining model seems to be a good strategy over the long term, but the company has to sell unwanted assets, said Fidelis Madavo, head of equities at South Africa's state-owned pension fund Public Investment Corp. Ltd., Anglo's largest shareholder. That process has been slow, he said, pointing to a September deal to shed labor intensive platinum assets in South Africa that could take over a year and a half to close.

Write to Scott Patterson at scott.patterson@wsj.com and Alex MacDonald at alex.macdonald@wsj.com

(END) Dow Jones Newswires

December 07, 2015 09:15 ET (14:15 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.