Bloomberg, Reuters and Wiseman Khuzwayo
ANGLO American plans impairments because of low commodity prices even after the company – with operations from Australia to Chile – raised annual iron ore production to a four-year high.
“Given the sharply lower commodity price environment, particularly for the bulk commodities, Anglo American expects to record certain non-cash impairment charges as special items for the 2014 financial year,” the company said yesterday. The group will release its latest annual earnings on February 13.
The company, which has lagged rivals for much of the past decade, is undergoing a restructuring focused on improving mining operations and selling less profitable assets.
Its turnaround efforts, however, have faced a rout in prices in copper, coal and iron ore, which make up much of its earnings. Anglo produced 48.9 million tons of the steelmaking ingredient in 2014, a 4.7 percent rise from the previous year, the London-based company said yesterday.
This included 688 000 tons from its Brazilian Minas-Rio project, which shipped its first consignment in October, and a 14 percent increase in production from its Kumba unit in South Africa to more than 48 million tons at its Kumba subsidiary, slightly ahead of its 47 million-ton target, it said.
Iron ore is the biggest earner for Anglo.
The new output from Minas-Rio comes as prices have fallen more than two-thirds since peaking in 2011, entering a bear market as producers including Rio Tinto, the world’s largest, expand supplies.
Anglo raised capital expenditure for Minas-Rio to $8.8 billion (R101bn) after an original estimate of $2.6bn and wrote down $4bn of the asset’s value in 2013.
Minas-Rio’s book value might exceed its current worth, or net present value, by more than $5bn by the end of the year assuming a long-term price for iron ore of $90 a ton, Credit Suisse Group said in a research report published last month. Anglo shares climbed as much as 4.5 percent to R198.96 before closing up 2 percent at R194.32.
Iron ore with 62 percent ferrous content delivered to China’s Qingdao port fell for a fifth day yesterday, declining 0.1 percent to $63.50 a ton, according to data by Metal Bulletin, the lowest since May 2009.
“Continued weak commodity-price performance may lead to other impairment charges,” Investec Securities said.
At the Anglo American Platinum unit group equivalent refined production rose 14 percent to 593 900 ounces for the quarter.