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Anglo American plans to slash mineral production in order to cut costs and combat a slide in its share price that has been far deeper than that at rival mining companies.
The FTSE 100 group, in which shares have slumped more than 30 per cent this year, said on Friday the production cuts would help lower capital expenditure by $1.8bn between 2023 and 2026 and reduce costs next year.
Shares in Anglo American fell by 6.3 per cent in morning trading on Friday, compounding its woes as the worst-performing of the large diversified mining companies including BHP, Rio Tinto and Vale this year.
Its plans include cutting production at its Kumba iron ore operations in South Africa and going down to one plant at its Los Bronces copper operation in Chile.
Anglo American’s chief executive Duncan Wanblad has encountered difficulties including commodity prices slipping from record highs and production snarls since he took over from Mark Cutifani in April 2022.
Wanblad said on Friday the company was “reconfiguring a number of our assets to adjust the production profile to near term constraints and market conditions”.
Anglo American has fared worse than rivals as prices for key commodities in its portfolio such as platinum and palladium — primarily used in catalytic converters that control emissions in cars — and diamonds have been hit particularly hard by the global economic downturn.
The company has been further hamstrung by its exposure to South Africa, which has been hobbled by a faltering power and logistics infrastructure. Almost 8mn tonnes of material has been stockpiled at its Kumba iron ore site because of rail issues.
Lower prices and the disarray in South Africa have affected its platinum group metals business particularly badly, leading Anglo American to say that it will focus on more profitable production.
Mining companies have been battling surging cost inflation for key inputs such as diesel and explosives. The company anticipates the measures will offset expected price increases, resulting in a 2 per cent reduction in costs in its 2024 financial year.
The production cuts are the latest in a series of actions that the company has committed to this year in order to lower costs next year by $1bn through business support cuts and other efficiencies.
While production across the company’s suite of commodities, which also includes steelmaking coal, copper and nickel, is set to rise 3 per cent in 2023, the actions will drag production down 4 per cent next year, it said.
The difficult times for the British company comes as it spends billions of dollars building the hugely ambitious Woodsmith mine in North Yorkshire to produce polyhalite, a new fertiliser product with an unproven market size.
Source: Financial Times