Anglo reviews value of cash-sapping Woodsmith

Anglo American is reviewing the value of its cash-sapping UK crop nutrients project, Woodsmith, in a process that might cause it to write down further impairments in the project that has already soaked up $7bn in capital expenditure.

The mining house, which recently fended off a multibillion-dollar bid from bigger Australian rival BHP, said on Thursday that it was reviewing the book value of Woodsmith.

“In light of the decision to rephase development of the Woodsmith polyhalite project, the group is reviewing the carrying value of this asset. It is expected that any adjustment to the carrying value will be reported within ‘special items’ in the [first half] 2024 financial statements,” the company said.

Anglo last year impaired $1.7bn in the value of its Woodsmith after the project ran behind schedule and over budget. Total expenditure on Woodsmith, including the acquisition of the project’s first owner, Sirius Minerals, in 2020 for £405m, tops $7bn.

The expenditure makes Woodsmith one of Anglo’s largest investments after spending $5.3bn developing the Quellaveco copper project in Peru. The group a few months ago cut back on Woodsmith capital expenditure as part of its “self-help” blueprint after the BHP bid.

Anglo cut capital expenditure to $200m in 2025 and made no capital expenditure in 2026 to help the group’s finances. This is down from the $1bn a year the company had initially planned to spend on the project.

Record production

The group in its second quarter production report said it had delivered a strong second-quarter performance overall, maintaining its production guidance for most of its assets, except coal, which was adjusted downwards.

“Minas-Rio achieved record second-quarter production, while our copper operations in Chile and Peru both performed well against our plans,” CEO Duncan Wanblad said.

“We are focused on continuing to deliver our strategic priority of operational excellence — improving performance stability is driving increased confidence in operational plans, including production volumes and unit costs,” he said in a statement on Thursday.

Copper production is tracking well to the group’s full-year plan and is 2% higher than the first half of 2023, but with a 6% decrease in the second quarter driven by lower throughput at Los Bronces and El Soldado in Chile, and planned lower grades at Quellaveco in Peru, partially offset by higher throughput at Collahuasi driven by the fifth ball mill.

Minas-Rio in Brazil achieved a record second quarter performance, but that was offset by a planned decrease at Kumba to align with third-party logistics constraints, resulting in flat production year on year for the iron ore businesses.

Kumba’s total production decreased 1% to 9.2-million tonnes, driven by a 12% decrease at Kolomela to 2.5-million tonnes due to the reconfiguration of the mine to align production to lower third-party rail capacity and alleviate mine stockpile constraints. Sishen’s production increased by 3% to 6.6-million tonnes, reflecting planned operational improvements.

Production from Anglo’s platinum group metal (PGM) operations was 2% lower, reflecting expected lower volumes from Kroondal and lower production at Mototolo, Mogalakwena and Unki, partially offset by 7% higher production at Amandelbult.

Steelmaking coal production increased 26%, driven by higher production from the Grosvenor underground mine and at the Dawson open cut operation in Australia, partially offset by challenging strata conditions at the Aquila underground longwall and higher waste tonnes extracted at the Capcoal open cut operation.

Due to an underground fire at Grosvenor, the operation was suspended and Grosvenor’s production was excluded from steelmaking coal guidance for the second half of the year, Wanblad said.

The new guidance range for the year is 14-15.5 million tonnes, compared with the previous 15-million to 17-million tonnes, with unit costs revised to $130-$140/tonne.

Nickel production was broadly flat, reflecting operational stability.

“In May, we announced our plan to accelerate our strategy by simplifying the portfolio and focusing on our world-class assets in copper, premium iron ore and crop nutrients,” Wanblad said.

“We are working at pace to execute on the asset divestments, including steelmaking coal — with the intention of optimising value for our shareholders, while minimising frictional costs, mitigating execution risks and enabling the delivery of significant sustainable cost savings. Work is progressing with the aim of substantively completing this transformation by the end of 2025.”

khumalok@businesslive.co.za
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