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Johannesburg - Anglo American shareholders shrugged off a second writedown on iron-ore assets and an impairment on coal mines as investors adjust to a new reality of lower prices.
Shares of Anglo were little changed in London after the company said it expects to record non-cash impairments of $3bn to $4bn on its Minas-Rio iron-ore operation in Brazil and some Australian coal assets.
The latest writedown in the value of the Brazilian asset, bought in 2008 for $5.1bn, follows a $4bn impairment in 2013. The project’s capital spend of $8.8bn is more than three times the initial estimate, and Anglo is bringing it to full output as prices of the steelmaking ingredient fell 37% in the year ended June.
“The write downs shouldn’t be a great surprise,” Stephen Meintjes, an analyst at Imara SP Reid in Johannesburg, said by phone. “The best you can do now is to get damn efficient. That includes trimming fat and headcount wherever you see it.”
Anglo rose 0.1% to 875.3 pence by 10:09am in London. The shares have fallen 27% this year, valuing the company at €12.3bn.
“The first six months of 2015 have seen significant further weakness and ongoing volatility in the prices of the bulk commodities, particularly iron ore and metallurgical coal,” the company said in a statement on Thursday.
“Anglo American has therefore reviewed its near- and longer-term commodity-price assumptions at the mid-year.”
‘Behind Plan’
Output at Minas-Rio, which made its first shipment in 2014, was 1.8 million metric tons in the three months ended June 30 compared with 1.2 million tons a quarter earlier, it said. Volumes were “marginally behind plan” due to adjustments at a filtration plant and the company will provide an update on production forecasts next week, Anglo said.
The impairment of some Australian coal operations comes as contracts for the fuel loaded at the Newcastle Coal Terminal declined 16% in the year to June 30. Production of thermal coal for export from the nation climbed 38% to 1.3 million tons from a year earlier, Anglo said.
Iron-ore output from Anglo’s Kumba unit fell 9% to 10.4 million tons from a year earlier after a 14% production decline at the Sishen mine in South Africa, Anglo said.
Output from its platinum unit, the world’s biggest producer of the metal, increased 60% to 572 000 equivalent ounces as some of its mines in South Africa recovered from a five-month strike that ended in June 2014.
Copper output fell 5% to 184 500 tons following a planned shutdown of processing plants at the Los Bronces mine in Chile due to water shortages, Anglo said.
The company also mines diamonds in southern Africa and Canada. Production at De Beers, the gem producer 85% owned by Anglo, declined 6% to 8 million carats.
Output of export metallurgical coal, used in steelmaking, rose 9% to 5.3 million tons. Output of the thermal variety for power plants rose 5% to 8.6 million tons.
