Anglo writes down $1.9bn in latest year

Published Feb 17, 2014

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Johannesburg - Diversified mining house Anglo American wrote down $1.9 billion (R20.5bn) at some of its operations, including its troubled South African platinum subsidiary, in the year to December, it said on Friday.

Anglo, which has its roots in South Africa, posted a 7 percent decline in earnings to $2.7bn for the year to December last year and a net debt of $10.7bn compared with $8.5bn in 2012.

Anglo wrote down $724 million at its Barro Alto nickel project in Brazil, $232m in the restructuring of its platinum operations, $331m at its Foxleigh coal mine in Australia, and $337m on the Michiquillay copper project in Peru. It also wrote down $311m on the disposal of the Pebble copper project in Alaska and $175m on the sale of Amapá in Brazil.

Mark Cutifani, the chief executive, said the $8.8bn Minas-Rio iron ore project in Brazil, which was delayed with cost overruns, would produce at the end of the year. About 84 percent of the work on the project was complete, he said. Anglo wrote down $4bn on cost overruns at Minas-Rio last year.

Diamond producer De Beers and Anglo American Platinum (Amplats) delivered higher production and sales in the period.

De Beers, which operates the Jwaneng mine in Botswana and the Venetia mine in Limpopo, contributed $1bn in operating profit. The firm’s operating profit rose to $1.003bn from a revised $474m in 2012.

The company increased production by 12 percent to 31.2 million carats, and has increased its production guidance to between 30 million and 32 million carats from between 29 million and 31 million carats.

“We are in a good place to fulfil the demand. We have tested the market since November and the demand is clearly good,” said Philippe Mellier, the chief executive at De Beers.

Last year De Beers completed a $5bn transfer of its marketing and sorting division from London to Gaborone, Botswana, after about 100 years in the UK.

Sales at Amplats rose 7 percent to 2.3 million ounces and operating profit rose by 7 percent to $464m.

While the metallurgical coal division posted record production numbers, it was weighed down by the 24 percent fall in commodity prices last year.

“The nickel portfolio will struggle to justify its position in the portfolio,” Cutifani said, adding that the group would consider reducing capacity at the nickel operations. Nickel production declined by 12 percent to 34 000 tons after production ceased at Loma de Niquel in Venezuela in 2012.

The platinum subsidiary is being restructured and the iron ore division is expected to improve following the pit improvements at the Sishen mine of Kumba Iron Ore.

The company maintained dividends at 85 US cents. Group underlying operating profit rose 6 percent to $6.6bn on the back of improved production.

Cutifani, who took over last year after the resignation of Cynthia Carroll, previously announced a $3.5bn cost-cutting exercise. He said the company needed to put more effort into delivering on its plan to achieve 15 percent return on capital employed to investors by 2016.

The firm reported an asset review last year, saying that only 11 percent of operations had met budget for eight quarters.

Cutifani said there had been a shift and 53 percent of the operations had met budget in the past four quarters.

Since taking over, he has consolidated the group’s business units into 10, and has identified 15 underperforming assets which he is assessing for possible sale.

Anglo shares fell 0.36 percent on Friday to close at R278. - Business Report

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