Anglo reports interim loss after another fertiliser writedown

Resources group Anglo American has reported a loss at the halfway stage after taking a $1.6bn impairment of the Woodsmith Mine crop nutrients project in the UK, but said it expects to reach a deal to sell its coal assets by early 2025.

CEO Duncan Wanblad said Anglo was still looking for partners at its Woodsmith fertiliser project in northern England. Despite the latest writedown, the company reiterated the operations were one of its three pillars alongside copper and iron ore after its restructuring.

The CEO is under pressure to boost returns to investors and demonstrate he can deliver on his May 14 plan to radically refocus the company on copper and iron ore, after fighting off a $49bn takeover attempt from bigger rival BHP Group.

The group reported an attributable loss of $672m for the six months to end-June from a profit of $1.26bn a year ago. The group said the $1.6bn impairment of Woodsmith, which affected earnings, was the result of a decision to slowdown the project’s development.

A fire at its Grosvenor mine threatened to delay a deal to sell its coking coal assets in Australia and hit its valuation.

Two-stage auction

Anglo said the company planned to conduct a two-stage auction process for the coal assets, including Grosvenor, adding that the mine would probably resume operations only under a new owner. “There are so many interested potential buyers for this set of assets,” Wanblad told reporters.

“Our expectation is that hopefully by the end of this year, very early next year ... we will have a deal,” he added.

According to analysts at Jefferies, Grosvenor accounts for about 30% of the $4.5bn value the brokerage attributes to Anglo’s steelmaking coal business.

Wanblad said the group was encouraged by a strong operational performance that delivered steady volumes and a 4% improvement in unit costs, while still facing weak cyclical markets for platinum group metals (PGMs) and diamonds.

“We are on track to reduce our annual run rate costs by $1.7bn and reduce capital spend by $1.6bn over the 2024-2026 period,” he said.

“We are moving at pace to create a much more agile and structurally profitable mining company focused on our exceptional quality copper and premium iron ore businesses, which both continue to perform very strongly, while maintaining our growth optionality in crop nutrients,” he said.

“We are committed to completing the key elements of this transformation by the end of 2025, creating a simpler, highly valued mining company with extensive growth options and considerable strategic flexibility.”

Net debt increasing marginally to $11.1bn reflects tight discipline to optimise capital allocation and free cash flow.

“We are transforming Anglo American by focusing on our world-class asset base in copper, premium iron ore and crop nutrients, thereby accelerating the recognition of value inherent in our business,” said Wanblad.

“From that compelling platform, I believe our proven project delivery capabilities, global relationship networks and long-standing reputation as a responsible mining company will together help us unlock the outstanding mineral endowment options within our portfolio and other growth opportunities that we will aim to secure over time,” he said.

Underlying earnings before interest, taxes, depreciation, and amortisation (ebitda) were 3% lower at $4.98bn, while revenue was 8% lower at $14.46bn.

The company reported a basic loss per share of $0.55 compared with earnings per share of $1.04 a year ago. Basic headline earnings per share (HEPS) were $0.42 compared with $1.35 in the prior comparative period.

An interim dividend of $0.42 was declared, down 24% from the previous year.

The group said copper and iron ore performance and margins were particularly strong, contributing $3.5bn to ebitda.

With Reuters

Update: July 25 2024
This story has been updated with new information.

mackenziej@arena.africa