Showing posts with label Anglo American. Show all posts
Showing posts with label Anglo American. Show all posts

Friday, February 1, 2013

Anglo writes down US$4bn on Minas-Rio project

Anglo American plc has written down the value of its Minas-Rio iron-ore project in Brazil by US$4 billion after significant increases in capital expenditure.

To reach phase one capacity of 26.5Mt/y, the project is now slated to cost US$8.8 billion, an US$800 million increase on its November 2012 guidance and more than 300% up on its original estimate of US$2.7 billion.

The project has been hit by huge cost overruns linked to the development of the mine, as well as delays in obtaining licences.

“Despite the difficulties, we continue to be confident of the medium and long term attractiveness and strategic positioning of Minas-Rio and we remain committed to the project,” Anglo’s chief executive (CEO) Cynthia Carroll said.

Anglo said the impairment does not consider any potential value from future expansion to 90Mt/y.

The projected first ore on ship (FOOS) date recently changed from late 2013 to late 2014, and the company has put in place a US$600 million contingency fund to ensure that the new deadline is hit.

Anglo has had a difficult year, with strikes in South Africa hitting platinum production.

In April, Carroll will be replaced as CEO by Mark Cutifani, head of AngloGold Ashanti.

Thursday, January 31, 2013

Anglo American takes $4bn hit on Brazil Minas Rio

London-based mining giant Anglo American (LON:AAL) confirmed Tuesday it will take a $4 billion writedown on the value of its flagship Minas Rio iron ore project in Brazil due to delays and mounting development costs.

The company said its capital expenditure on the project was now expected to hit $8.8 billion, more than three times the $2.6 billion projected back in 2007. It also revealed that its forthcoming full-year results would be hit by the impairment charge.

“We are clearly disappointed that the diversity of challenges that our Minas Rio project has faced has contributed to a significant increase in capital expenditure,” said outgoing CEO Cynthia Carroll.

“Despite the difficulties, we continue to be confident of the medium and long-term attractiveness and strategic positioning of Minas Rio and we remain committed to the project, ” she added.

Of the 300-odd licences required for the project, only 17 are left outstanding, added Carroll, who will be replaced by AngloGold Ashanti’s (NYSE:AU) CEO, Mark Cutifani, at the end of March.

Minas Rio is one of Anglo's major capital allocation fiascos of recent years and was largely responsible for Carroll's deteriorating image.

The company acquired its first stake in the project in 2007 and took control the following year after sealing a $5.5 billion deal with Brazilian billionaire Eike Batista's MMX.

So far Anglo has spent $5 billion on developing it and said last year that total development costs could exceed $8 billion – more than three times original estimates.

The project was intended to help diversify Anglo’s assets, which at that point was heavily dependent on South Africa for the bulk of its revenue. Instead it turned out to be a bruising top-of-the-market deal.

Falling profitability and worries about Minas Rio has weighed heavily on Anglo's stock.

The $39 billion counter is down just under 30% over the past year, compared to peers BHP Billiton, Rio Tinto and Xstrata, which have been trading mostly flat.

Shares in the group were trading high in London on Tuesday afternoon, climbing 2.75% to 1,924.00 at 2:33 pm GMT.

Anglo American will release its 2012 results on February 15.

Wednesday, January 9, 2013

Anglo close to naming AngloGold's Cutifani as CEO

Global miner Anglo American is close to appointing Australian Mark Cutifani, head of gold miner AngloGold Ashanti, as its new chief executive, two sources familiar with the situation said.

If the appointment is finalised, Cutifani will replace Cynthia Carroll in what analysts and investors see as one of the toughest jobs in the business, joining Anglo as it tackles restive unions in South Africa, restructures its platinum arm and tries to recover from delays that have driven up the cost of a flagship iron ore project in Brazil.

Carroll announced in October that she planned to step down after more than five years at the helm, under pressure from investors unhappy with Anglo's lagging share price and its dependence on strike-hit South Africa.

Monday, December 24, 2012

Anglo American says last Minas-Rio injunction lifted

Global miner Anglo American said on Friday an injunction blocking installation of an electricity transmission line at its Minas-Rio iron-ore project, in Brazil has been lifted, clearing the final hurdle for the project.

A Brazilian court removed two injunctions in September, letting the company restart construction at the mine site, which has a capacity of 26.5-million tons a year.

The removal of the final injunction on Friday will allow the company to install a 90 km electricity transmission line.

The project has faced a series of delays and cost overruns since it was bought for $5.5-billion from Brazilian billionaire Eike Batista's MMX Mineracao e Metais in 2008. Criticism of the project soured the relationship between Anglo American's former CE, Cynthia Carroll, who championed the purchase, and leading shareholders. Carroll resigned in October.

The company raised the estimated cost of the Minas Rio project last month, saying it was unlikely to cost less than $8-billion.

Anglo American shares fell 0.48% to 1 855.48p in London.

Edited by: Creamer Media Reporter

Wednesday, December 5, 2012

Thunderous applause as Anglo CEO commits to South African mining solution

By: Martin Creamer

South Africa had succeeded in extricating itself from its grave political problems in the past and the country would succeed again in finding solutions in the wake of the horrific Marikana tragedy, Cynthia Carroll said on Tuesday.

At the same time, the Anglo American CEO, who is stepping down after six years, warned that South Africa had to restore stable labour relations and foster a business environment attractive to international investors.

Carroll drew thunderous applause from a packed Gordon Institute of Business Science (GIBS) audience when she concluded her 30-minute address by saying that “the naysayers and the doomsdayers constantly forecast disaster, but in response, I say loud and clear, South Africa has done it before and it will do it again”, by arriving at a post-Marikana solution to which her company was also totally committed.

She said that the Constitutional foundation that had been laid when South Africa transitioned from the “dark night of apartheid to the new dawn of democracy" would help the country disentangle itself from its post-Marikana crisis.

She observed that the curse of unemployment had resulted in mineworkers often having a large number of economic dependents, against the background of the migrant labour system loosening the bonds of family life and dislocating communities.

Many underlying pressures had been further inflamed by bitter rivalry between established and emerging unions, with a political division underpinning that rivalry.

But whatever the underlying causes, simple truths had to be recognised, and the first of these was that there was no future for any society without law and order.

“We saw people murdered. We saw people brutally attacked. We saw extensive damage to property, all designed to create a climate of fear that would deter people from going to work,” Carroll said of Anglo American Platinum’s (Amplats’) own experience, adding that it was time for all right-thinking people to say "enough is enough".

The second truth was that workplace anarchy did not benefit anybody and freely negotiated collective agreements had to be observed.

The third truth was that economic reality could not be defied and businesses that could not generate adequate returns would ultimately collapse and die.

Management had a responsibility to employees as well as shareholders to ensure that companies remained economically competitive and had to resist the intense pressure for economically unsustainable pay increases that had been placed on a platinum industry that was already in crisis.

“And the near-term future shows no sign of respite,” Carroll revealed.

In the case of Amplats, remedial action was essential and “we will not shirk from taking tough decisions”.

For the sake of all stakeholders, Amplats had to be right-sized and shaped to be able to compete successfully in the global market.

The fourth truth was that South Africa would only succeed if it fostered an environment conducive to business and attractive to international investors and the restoration of stable labour relations was critical to perceptions that South Africa was a place to do business.

Investors would not be comforted by well-meaning reassurances that flew in the face of the facts but would make their judgements on the basis of reality, which needed to be changed in order to change the perceptions.

Regulatory stability was also key to competitiveness and nowhere was this truer than in the mining industry, which was critical to South Africa’s prosperity, contributing R25.8-billion in corporate tax and R5.5-billion in royalties in 2011, when mining exports represented 38% of the total value of goods exported.

The mining sector directly employed more than 500 000 people and was indirectly responsible for a further 840 000 jobs, with some 13.5-million people directly dependent on those mining-generated jobs.

In 2011, out of a total mining industry expenditure of R437-billion, 89% was spent in South Africa itself.

But mining companies needed regulatory certainty and would not invest if there were fears of unpredictable rule changes.

“The regulatory debate in South Africa has been going on for a very long time and it is still not completely resolved.

“The spectre of nationalisation has been laid to rest, but the need to guard against damaging regulatory changes remains,” Carroll told the GIBS audience.

Edited by: Creamer Media Reporter

Wednesday, November 14, 2012

Anglo American needs dealmaker CEO to unlock value

Kevin Allison reckons what the miner really needs is someone who can think the unthinkable - like demerging its troubled South African platinum unit and finding a strategic buyer for the rest.

Author: Kevin Allison

Anglo American needs a dealmaker chief executive to unlock value. It may be tempting to replace Cynthia Carroll with an operational obsessive who can deliver big projects. That's where the outgoing boss struggled. But what the miner really needs is someone who can think the unthinkable - like demerging its troubled South African platinum business and finding a strategic buyer for the rest.

The case for appointing a seasoned project manager is superficially attractive. Carroll's unpopularity has a lot to do with her handling of the challenging Minas Rio iron ore project in Brazil. But Anglo's biggest problems there, and in South Africa, where months of labour strife have hobbled its already-struggling platinum business, are bureaucratic, socio-economic and hard to solve. This is reflected in a hefty share price discount. The stock trades on a forward cash flow per share multiple of 4.9 times - 29 percent below its big mining peers, according to Reuters Starmine.

Companies shouldn't generally run themselves to be taken over. Yet in Anglo's case there is a clear opportunity to unlock value by splitting off the poison-pill platinum business and auctioning the rump. Breaking up Anglo by handing its 80 percent stake in Anglo American Platinum, the world's largest producer, over to shareholders could be controversial in South Africa, where the group is a huge employer. The move could be seen as a slap to the country. But it shouldn't be impossible.

Anglo shareholders should be happy to be left holding two pieces of paper: one an option on an eventual turnaround in platinum, the other a viable, re-rated core business with attractive assets in copper, nickel, iron ore and coal, plus the world's biggest diamond business.

"New Anglo" would be even further behind super-giants like Rio Tinto and BHP Billiton in production terms. But the company would also be an attractive acquisition target for either Xstrata or, as seems likely, a newly-enlarged Glencore.

It would take a skilled dealmaker to smooth the way towards a platinum exit and extract a full price for the rump from Glencore boss Ivan Glasenberg. Anglo strategy director Peter Whitcutt, a soft-spoken South African who steered Anglo through a political minefield during its recent showdown with Chile’s national copper producer, looks like a benchmark internal candidate. He was closely involved in Anglo's defence against Xstrata's merger approach in 2009. Either way, it's clear what kind of leader Anglo needs.

CONTEXT NEWS

- Anglo American warned on Nov. 13 that total spending on its giant Minas Rio iron ore projects in Brazil was likely to top $8 billion - currently the high end of most analysts' forecasts. The Anglo-South African miner said it was carrying out a "detailed review" of cost estimates for the project.

- The update on Brazil came as Kumba Iron Ore, Anglo's majority-owned South African iron ore arm, issued a profit warning. Kumba said full-year earnings were likely to fall 20 percent after a wildcat strike.

- Anglo, which recently announced that its chief executive, Cynthia Carroll, would step down next year, repeated an earlier forecast that it expected to ship the first ore from the much-delayed project by the second half of 2014.

Monday, November 5, 2012

Glencore in bid for Anglo's stake in Brazilian iron-ore unit

Glencore is one of the bidders for Anglo American's majority stake in the Amapa iron-ore operation in northern Brazil.

Other bidders in the second phase of the sale process include Russian steel producer Severstal, privately owned mining group Zamin, and Australia’s Centaurus.

The project has been deemed noncore and has been on the block since last year by Anglo American.

A sale of the 70% stake in Amapa would be good news for Anglo, whose CE resigned recently. Cynthia Carroll quit due to investor pressure about, among other factors, delays and cost overruns at the Minas Rio operation. Selling Amapa would allow Anglo’s Brazilian team to focus on Minas Rio, which is central to recover ing the miner’s underperforming shares.

An internal valuation last year put Amapa’s value at $1.5b n, but that value is expected to have dropped significantly as the iron-ore price has weakened.

Friday, November 2, 2012

Barrick Gold profit dips, again lifts capex of S American project

The world’s largest bullion producer Barrick Gold reported a 55% decline in third-quarter profit as lower sales volumes and lower realised gold prices weighed, and the comapny again lifted the capital expenditure (capex) allocation for its Pascua-Lama project, straddling the Chile/Argentina border.

During a quarterly earnings call on Thursday, Barrick CEO Jamie Sokalsky said the company had lifted the capex allocation to complete the massive Pascua-Lama project to between $8-billion and $8.5-billion, up from the $7.5-billion to $8-billion announced at the end of the second quarter. Production was also delayed to the second half of 2014.

Barrick said it was undertaking a top-to-bottom review of the project with engineering, procurement and construction management firm Fluor, which it contracted to oversee the project, after initially attempting to manage construction of the project internally. The results of this review are expected early in 2013.

The company also said it had renewed its focus on increasing shareholder value through its disciplined capital allocation framework, which had resulted in the company cutting or deferring about $3-billion in capex that was budgeted over a four-year period, which it said was the result of recalibrating longer-term production to higher-quality levels.

This had resulted in about $1-billion cut from 2013 capex spending, with next year’s capex structure expected to look the same as that of 2012.

Barrick expected gold production of between 7.3-million and 7.5-million ounces, within its original guidance of 7.3-million to 7.8-million ounces, but total cash costs for gold were expected to increase to between $575/oz and $585/oz, up from the previous guidance of $550/oz to $575/oz.

The company said this was mainly the result of higher cash costs from Australia Pacific and its 73.9%-owned Africa-focused subsidiary African Barrick Gold. It confirmed it was in talks with China National Gold Group about the sale of African Barrick.

The miner also lowered its full-year outlook for copper to 450-million pounds as production was delayed at Jabal Sayid, in Saudi Arabia. This was down from the initial estimate of 600-million pounds. The company was notified in the third quarter by the Saudi government that the $400-million project did not comply with the required safety and security measures, resulting in the company being restricted from using explosives at the mine.

Equinox Minerals, the previous owner of the copper project designed the safety and security system to Western Australian standards, which differ from Saudi Arabian standards. This would prevent the company from mining the deposit in 2013, prompting the company to lower its copper production guidance to between 500-million and 550-million pounds of copper.

Barrick expected to be in full compliance by 2014. The project was expected to produce 100-million to 130-million pounds of copper within its first five years of production. The company acquired the project as part of its $7.5-billion acquisition of Equinox in 2011.

The company’s overriding goals are to attain production of eight-million ounces of gold by 2016, and yearly copper production of about 600-million pounds by 2015, which could increase to more than a billion pounds if it chose to proceed with the Zaldívar-sulphides and Lumwana expansions.

During the quarter ended September 30, Barrick’s net profit fell to $618-million, or 62c a share, down almost 55% from $1.37-billion or $1.37 a share in the comparable period a year earlier. On an adjusted basis, Barrick earned 85c a share, down from $1.38 a share a year earlier. Analysts, on average, had expected adjusted earnings of $1.01 a share.

The TSX- and NYSE-listed miner’s revenue was down 13.5% year-on-year in the quarter to $3.4-billion, compared with $3.9-billion a year earlier.

Barrick produced 7.7% less gold at 1.77-million ounces, and sold 6% less gold at 1.79-million ounces during the period compared to a year earlier.

The company’s Toronto-listed shares traded down 8.89% at C$36.80 apiece on Thursday.

Edited by: Creamer Media Reporter

Sunday, October 28, 2012

Anglo American's problems aren't over yet

Just because the company is looking for a new CEO, doesn't mean it has solved its problems.

Author: Geoff Candy

Anglo American shares jumped almost 4% Friday on the news that Cynthia Carroll is stepping down as CEO. But, the bounce will, most likely, be short lived.

As one analyst pointed out to Mineweb on Friday: "The problems haven't gone away and anyone who thinks they have is dreaming. There are some really big problems they have to resolve, particularly in their platinum business."

Indeed, even the departing CEO isn't actually expected to leave much before the middle of next year.

But, for most commentators spoken to today, the fact that Carroll is to remain in the chair for a while yet, is a good thing. Irrespective of the market's view of her performance over recent months, her immediate departure and the leadership hole that it would have created might have been bad for the group and its operations.

Solidarity general secretary, Gideon du Plessis, echoed this is sentiment, saying in a written statement that Carroll's resignation is a major setback for the South African mining industry and for the country's image as an investment destination.

And, it is in South Africa, and especially within its platinum district, that Carroll's successor is going to have their hands full.

Carroll is well respected within South African mining and political circles and her role over the next few months is likely to remain important to the group's plans, especially in light of the platinum review that is currently underway. But, it is unlikely that any real resolution to these issues will be reached before she departs.

After falling sharply in 2008 and 2009 years, the group has rebuilt up its operating profit line at its platinum operations, but recent events have provided a great deal of cause for concern.

For the third quarter, the group reported a six percent drop in equivalent refined platinum production as a result of lower output at the Union North and South, Mogalakwena, Tumela and Siphumelele mines.

But, more importantly than that, the group is losing roughly 4,500 ounces of platinum production a day because of illegal strike action at its mines.

"As a result, and dependent on the resolution of the illegal strike action, the expected refined platinum production for 2012 is reduced to between 2.2 and 2.4 million ounces," the group wrote in its Q3 production report published yesterday.

"Given the retained fixed cost base, and as result of the reduction in production, the 2012 unit cost is expected to be R15,500 to R16,000 per equivalent refined platinum ounce," it added.

Platinum is not, however, the group's only problem. As South Africa's Public Investment Corporation noted, "Poor capital allocation has eroded value in the company over the last few years...We also see this poor capital allocation as limiting dividend paying potential for the group, resulting in unattractive dividend yield versus its peers."

It added, "that the group has produced a disappointing operational performance, particularly in copper, coal and PGMs and has had difficulty in delivering growth projects on time and to budget."

Of particular concern here has been the group's Minas Rio iron ore project in Brazil. Carroll is on record saying, "Minas-Rio is one of the largest and most complex projects in the world, and certainly in Brazil.

And the group wrote in its production report out yesterday, "If all the current impediments are cleared by the end of 2012 and there are no major unexpected interventions, it is anticipated that first ore on ship will be delivered in the second half of 2014. Capital expenditure for the completion of this project was expected to be approximately $5.8 billion, however the quantum of a further increase is currently under review."

Over and above that, the group is having issues with grade at its new Los Bronces copper project while dealing with declining production at its massive Collahuasi copper mine. And, more generally the group faces a flat market for many of its products in the wake of tepid global economic growth.

As one analyst told Mineweb, it looks very much like Anglo American has lost its way. "There have been cost overruns and delays on a number of projects. There was the whole debacle with Codelco that caught them napping and finally, there is the deal with De Beers, which until now, seems to have been a very sideways move."

But why now?

All of these issues have been a worry to those concerned for some time and there doesn't seem to have been a single so-called final straw. So, why announce Carroll's departure seemingly so suddenly, without a clear successor already in place?

Some speculate while the group considered first looking for a successor before announcing the change, the decision was taken to announce that Carroll is stepping down and then begin the search. The thinking goes had they done so 'in secret', knowledge of the head hunting effort would most likely have leaked out anyway.

Given the issues above and the current uncertainty about metal prices, especially iron ore, coal and copper one begins to believe Anglo American chairman, Sir John Parker when he said [who is parker? first reference to him is here], "today's decision is very much based on Cynthia's decision which the board has accepted that she feels the right time has come to step down from what is a very challenging role."

And, while share prices across the diversified sector have languished of late and many analysts remain hopeful that metal prices will pick up over the course of the next 12 months as the global economy picks up slightly, whoever steps into the position is going to have an equally challenging time.

Source: Mineweb

Tuesday, October 23, 2012

Anglo reaches labour deal with Chile Los Bronces - union

Global miner Anglo American and unions at its Los Bronces copper mine in south-central Chile reached a labor contract after five months of difficult negotiations, a union source told Reuters on Monday.

Anglo's flagship Los Bronces deposit produced 245 000 t of copper last year. Chilean state miner Codelco and Japanese trading houses Mitsubishi and Mitsui also have stakes in the mine.

"The vote was very divided," Eduardo Rocco, president of the MSA union, told Reuters. He said 51% of workers in his roughly 600-strong MSA union voted in favour of the deal.

The four-year agreement includes a 4% salary increase as well as bonuses and loans worth around $33 000, Rocco added. He said another union, known as Union No 2, with about 500 members, had also agreed to the deal.

A spokesman for Union No. 2 confirmed it had reached a deal with Anglo, but could not give further details.

Anglo was not immediately available for comment.

Los Bronces plans to double its annual output and could produce a peak of 490 000 t of copper a year, positioning itself as the world's No 5 copper mine.

Anglo ended a bruising ten-month legal battle with rival Codelco in August by agreeing to sell a stake of its south-central Sur properties at a discounted sum of $2.8-billion.

Chile, the world's leading copper producer, was hit by a wave of work stoppages last year, as record prices for copper triggered demands for higher pay and improved benefits.

Edited by: Creamer Media Reporter

Sunday, September 16, 2012

Anglo American Platinum suspends its Rustenberg operations

Anglo American Platinum has announced the suspension of all operations at its Rustenberg mines with immediate effect.

It made this decision to protect the company and its staff from intimidation and violence from striking workers from other mines in the area.

Chris Griffith, CEO of Anglo American Platinum, said: “Our employees are not on strike. However, in light of the current volatile situation in the Rustenburg area, where our employees who want to go to work are being prevented from doing so and are being intimidated by the threat of violence, Anglo American Platinum has decided to suspend its operations in the Rustenburg area with immediate effect. The suspension will continue until such time as operations can be safely resumed.”

Cynthia Carroll, chairman of Anglo American Platinum, said: “We have taken this decision to suspend our operations in order to help ensure the safety of our employees – our absolute priority. Our people want to work and it is unacceptable that they are not able to go to work safely and instead are facing considerable intimidation. We are in touch with the authorities at the highest level to identify how we can work together with our tripartite partners – government and the recognised labour unions – to achieve a swift and peaceful resolution to these illegal actions.”

Protesting miners dismissed claims from the company that its miners were not on strike and that the company suspended operations for safety reasons.

Protesting Anglo American Platinum miners said one of their demands they wanted was a monthly salary of R12 500 after deductions.

National Union of Mineworkers spokesperson Lesiba Seshoka said most staff members had been prevented from going to work due to intimidation by those who were now protesting outside the mine.

Sunday, August 26, 2012

Mitsui to market large share of output from Anglo Chile unit

Mitsui's direct ownership amounts to roughly 5%, but it will have the right to market the entire output share from its JV with Codelco, totaling 120,000 t/y of copper

Japanese trader Mitsui & Co said it would get the right to market a larger-than-expected share of production from Anglo American's Chilean mining unit after it backed Chile's Codelco in a battle for a stake.

Anglo and Codelco, the world's largest copper producer, reached an out-of-court deal on Thursday that ended a 10-month row over the stake in Anglo American Sur.

Codelco and Mitsui, who financed Codelco with a $1.9 billion loan, together now have 29.5 percent, while Anglo's share falls to 50.1 percent.

Mitsui's direct ownership amounts to roughly 5 percent, but it will have the right to market the Codelco-Mitsui venture's entire output share, 120,000 tonnes of copper per year, from the unit's south-central Chilean assets, which include the Los Bronces copper mine, slated to become the world's fifth biggest.

The mining industry worldwide has watched the prolonged dispute over Anglo's Chilean mines as avid Chinese demand for metals pressures miners to scramble for the few promising copper deposits left to exploit.

"There are few locations around the world where copper output is increasing, and at the same time demand from developing countries including China is very strong," said Yasushi Takahashi, chief operating officer of Mitsui's Mineral & Metal Resources Business Unit, said on Friday.

"The bottom line is we expect the tight copper market to continue," Takahashi said at a press briefing in Tokyo.

Mitsui said it would sell most of the concentrate to Japanese smelters.

Copper prices have fallen 13 percent from this year's peak of $8,765 per tonne in February, as global economic growth including in China has slowed, but miners and analysts say tight supply is likely to support the price.

Under the deal over Anglo American Sur, the business's profit will be distributed among the partners and all will now have a pro-rata share of production to market, or offtake. Mitsui will also get Codelco's share of offtake.

The Japanese company will also receive 30,000 tonnes per year of copper from other Codelco assets, which it secured in return for agreeing to provide the Chilean company with a loan to buy the Sur stake.

That brings its offtake to 150,000 tonnes per year, as much as 10 percent of Japan's annual imports of 1.4 million to 1.5 million tonnes, Mitsui officials said.

Japan's cash-rich trading houses have been taking advantage of a strong yen to scoop up commodities and minerals assets around the world.

Mitsui will pay $1.1 billion for its direct 5 percent stake in Anglo American Sur, which could rise to 9.5 percent at a later date should Codelco decide to repay part of the loan with more shares in their joint venture.

Codelco and Mitsui may explore further mining opportunities together in Chile or internationally, Codelco said in a statement to Chile's regulator on Thursday.

"If there's a chance to develop new copper mines in Chile or abroad, we would seriously consider accepting proposals to help Codelco do that," Takahashi said.

Source: Reuters

Thursday, August 23, 2012

Anglo American, Chile's Codelco settle dispute

Anglo American and copper giant Codelco ended a bruising ten-month long dispute on Thursday, with the global miner agreeing to sell its Chilean rival a stake in its coveted south-central Chile properties at a discount to the market price.

The cash deal, worth more than $2.8-billion excluding land, will see Anglo reduce its ownership of its Anglo American Sur properties to 50.1%, as the miner and fellow shareholder Mitsubishi sell a combined 29.5% to Codelco and its financing partner, Japan's Mitsui & Co.

Codelco will also get unspecified land adjacent to its flagship Andina mine. A source familiar with the deal said on Wednesday the land was worth around $400-million.

Under the agreement, reached a day before the agreed deadline, Anglo will sell 24.5% to a Codelco-controlled joint venture between the Chilean powerhouse and trading house Mitsui for $1.7-billion in cash.

The Codelco-Mitsui partnership will buy an additional 5% shareholding for another $1.1-billion, with shares made up 0.9% from Anglo and 4.1% from Mitsubishi. The 4.1% will be bought by Anglo from Mitsubishi for $890-million, and subsequently sold on.

The deal has been done at a discount to a previous valuation of the option, which suggested a price for the 24.5% at around $2.8-billion, reduced from an earlier $3-billion after copper prices fell.

Last October, Codelco said it would exercise its option to buy a 49% stake in the Anglo Sur mining complex when the option window opened in January 2012.

It secured a $6.75-billion bridge loan from Mitsui to exercise its option, with the right, but not the obligation, to pay off part of the loan through the sale of an indirect stake of half the shares acquired.

Weeks later, Anglo dented Codelco's ambitions and surprised the market with a pre-emptive sale of a 24.5% stake in Anglo Sur to Mitsubishi. Anglo said the $5.4 billion deal secured better value for investors.

Since then, the companies have been tussling for the properties.

Source: Reuters

Monday, July 30, 2012

$80-trillion urban boost for mining projected – Anglo

Projections to 2025 point to cities around the world constructing the equivalent of the entire land area of Austria – 80 000 km2 – in residential and commercial floor space, which will require $80-trillion worth of investment.

Moreover, Anglo American CEO Cynthia Carroll said at the diversified major’s latest set of results, which saw operating profit fall 38% to $3.7-billion, that demand growth from now to 2025 for container traffic was expected to grow at a compound annual growth rate of 7.2%.

The global car fleet, Carroll added, was projected to double to 1.7-billion by 2030, covering ten times the average distance between the earth and the moon and cities would need an additional $10-trillion in yearly investments.

While tough short-term demand conditions do confronted the industry, long-term demand and supply scenarios continued to point to the modern world being mining’s oyster.

The latest Economist quotes BHP Billiton as projecting another 250-million Chinese to swop their villages for cities in the next 15 years, which would follow the 200-million that did so between 2000 and 2010, and diversified major Vale of Brazil tells a similar story or mining-boosting urban growth on the way that should buoy mining.

Carroll pointed out further that as development in emerging countries shifted over time from investment to consumption, the pattern of demand would change - but still keep mining in the money.

As that shift from investment to consumption took place, the rate of demand for steel demand - and consequently iron-ore, coking coal and manganese - would moderate, but then the expanding middle classes in many emerging countries should boost consumption of precious metals and minerals - in Anglo's case, platinum and diamonds - as that transition occurs.

One billion people were forecast to enter the consuming classes by 2025 and Carroll emphasized that Anglo’s diversified and time-balanced portfolio was positioning the company well to take advantage of the structural changes in the global economy.

And what was happening on the supply front was, Carroll added, just as important to prices as was the long-term demand picture.

Supply constraints - as well as difficulties producers faced to deliver that supply - would support prices.

Projects were facing significant delays as a result of increasingly complex planning and permitting regimes, exemplified by what Anglo itself was experiencing with its Minas-Rio iron-ore project in Brazil, a country where 40 projects worth $225-billion are currently facing delays averaging 24 months.

Developing and developed countries alike were seeking a larger slice of the mining cake, whether it was through JVs with mining companies, windfall taxes, increased royalties and in some cases mining-asset expropriation.

Remaining resources are located in places difficult to access and which have under-developed or non-existent infrastructure.

At the same time, mining itself is becoming more difficult, more challenging with existing operations facing grade declines and higher waste stripping.

In an industry that thinks in decades rather than years, capital allocation and balance sheet management required discipline and sound judgment and Anglo it is invested in the right commodities and the right high-quality and low-cost assets at the right time.

Source: Creamer Media Reporter

Anglo cuts $1.5bn group capex, promises $200m platinum cut by year-end

Anglo American would deliver a cut of nearly $200-million out of the capital expenditure (capex) programme of Anglo American Platinum (Amplats) by year-end and lop $1.5-billion off 2012 group capex, Anglo CEO Cynthia Carroll said on Friday.

The downward revision of the previously guided capex would be from $7-billion to $5.5-billion and on platinum, Carroll said: “We’ll go beyond our capital reduction target for platinum and deliver a cut of almost $200-million by the end of the year.”

In addition to the $1.5-billion group cut for 2012, $200-million less would also be spent on exploration and early study development this year.

“For 2013, we’ve set a capex funding target of $6-billion and the 2013 funding target for exploration and early studies will be $600-million, down a further $300-million on 2012,” Carroll added.

There was “no silver bullet” as far as platinum was concerned and the group’s platinum review process would not be rushed.

Platinum’s current 11% profit margin, though in line with the current industry norm, was unacceptable for the medium to long term, and Amplats was working through the review to assess the optimal configuration of the portfolio.

This would take time and it would not be easy. In the light of the current volatile environment, discipline was paramount.

At a group level, Anglo would also be disciplined and strike the right balance in allocating capital.

The group would sequence investment in line with its funding capacity and focus on the most value-accretive options.

“We’re responding to tough times, but let there be no doubt in anyone’s mind that we’re well positioned to get through them in strong shape,” Carroll said, after announcing a 38% lower $3.7-billion group operating profit for the six months to June 30.

Macquarie First South Securities mining head Kieran Daly asked when and how Anglo would inform the market of the results of the platinum review - would it be at year-end, or during next year’s results presentation or at the end of the year.

A persistent Daly also wanted to know whether the company had taken decisions on any of the joint venture (JV) assets in view of platinum junior Atlatsa, formerly Anooraq, saying it was comfortable with its Bokoni mine in the Amplats stable, and whether government and labour were included in the review process, to give the review's decisions a realistic chance of implementation.

Carroll’s response was that Amplats platinum portfolio, with 12 operating mines, seven JVs, 58 000 employees and 580 000 dependents, was complex and massive and would not be done independently.

“We will look at the entire value chain, from resources to mining to processes sales and marketing and people, and no option is off the table, and we will retain platinum as a part of Anglo American as a starting point," Carroll reiterated.

New CEO Chris Griffith would implement the review decisions from September 1 and 60 000 oz of high-cost platinum had already been taken out of the system and the study into high-cost ounces was ongoing.

The key objective was to thoroughly access the options available to establish a long-term portfolio with sustainable competitive advantages that would maximise value.

There was no doubt that the global economic environment had deteriorated, driven by the commodity prices in the Eurozone and there was continuing uncertainty over the sustainability of the US economic recovery.

China’s slowdown in growth rate was also contributing to the contributing to the gradual short-term outlook.

But in the longer term, Anglo continued to see resilient commodity demand, driven by rising living standards in emerging countries like China and India and infrastructure replacement in developed countries.

If current trends were sustained, by 2025 cities around the world would build the equivalent of the landmass of Austria in residential and commercial floorspace and this would require cumulative investment totalling some $80-trillion.

As development in emerging countries shifted over time from investment to consumption, growth rates in steel demand should moderate and the expanding middle classes in many emerging countries should boost consumption of platinum and diamonds as that transition occurs.

One billion people were forecast to enter the consuming classes by 2025 and Anglo’s diversified and balanced portfolio positioned the company well to take advantage of the structural changes in the global economy.

What was happening on supply was just as important. Supply constraints as well as difficulties producers faced to deliver that supply would underpin prices.

Projects were facing significant delays as a result of increasingly complex planning and permitting regimes.

Developing and developed countries alike were seeking a larger slice of the mining cake, whether it was through JVs with mining companies, windfall taxes, increased royalties and in some cases mining-asset expropriation.

Remaining resources were located in places difficult to access and which had under-developed or non-existent infrastructure.

At the same time, mining itself was becoming more difficult, more challenging with existing operations facing grade declines and higher waste stripping.

In an industry that thought in decades rather than years, capital allocation and balance sheet management required discipline and sound judgement.

Anglo had invested in the right commodities and the right high-quality and low-cost assets at the right time and the company still had “the best pipeline of growth options in the industry”.

Anglo increased its dividend by 14% despite 46% lower earnings at $1.7-billion and the company was determined to maintain and build on that new base through the cycle.

The company recognised that future cash flows would be impacted by both economic uncertainty and higher operating and capital costs and to maintain its investment rating and dividend to shareholders, it would sequence investments to take advantage of all stages of development in emerging countries.

Source: Creamer Media Reporter

Friday, July 27, 2012

Anglo American disappoints: profits down 40% and Minas Rio delayed another year

Global miner Anglo American (LON:AAL) joined the ‘disappointing results club’ this morning as the London-listed mining group reported that its first-half operating profit dropped almost 40% – reportedly driven by weak commodity prices and mounting costs.

The group published an operating profit of $3.7 billion in the January-June period, while earnings reached $4.9 billion, representing a 31% drop and below the forecasted $5.2 billion.

Further disappointment came as Anglo announced another setback to its flagship iron ore project, Minas Rio, in Brazil. Licensing issues have delayed production at the mine, which is now expected to start exporting the commodity by the end of 2014, a year behind schedule.

“We are in a very challenging country and environment. There are 50 projects that have been put into the delay category, “ said Anglo American CEO Cynthia Carroll.

She added that many of the regulations in place were not there just six months ago; Carroll met Brazilian President Dilma Rousseff Thursday night to emphasize that point, hoping to find an end to the obstacles the company is facing in the South American country.

Despite the macroeconomic uncertainty and likely higher capital and operating cost within the industry, Carroll said Anglo American was committed to returning cash to shareholders – increasing its interim dividend by 14% to 32 cents per share.

Operating profits from the copper division, the second-largest business for Anglo American, fell 30% as the expansion of its Los Bronces copper mine in Chile was affected by adverse conditions including bad weather, stoppages and operational problems at Collahuasi.

Anglo shares dropped 1.65% to 1,931.50 pence on Friday in early morning trade in London.

The company also said it will deliver a cut of nearly $200 million out of the capital expenditure (capex) programme of Anglo American Platinum (Amplats) by the end of 2012.

Friday, July 13, 2012

Peru says deal reached on Anglo American mine

Peru has brokered a deal between the regional government of Moquegua and Anglo American to allow the global firm to build its $3-billion Quellaveco copper mine, Prime Minister Oscar Valdes said on Thursday.

Anglo American will make voluntary payments to communities near the mine of some $370-million during the mine's 30 years of operations, said Valdes, who is struggling to resolve hundreds of social conflicts in Peru, including protests against Newmont Mining's $5-billion Conga project in the northern region of Cajamarca.

"Yesterday (Wednesday), we resolved the issue of Moquegua and Anglo American with Quellaveco, it was a long negotiation with steep demands," Valdes said on local radio.

Anglo American's country manager Luis Marchese declined to comment. Marchese told Reuters on Monday the company had won crucial community support for its water plan and hoped to secure government approval to start construction soon in the southern region of Moquegua.

Quellaveco would produce 220 000 t of copper a year, about a fifth of 2011 output in Peru, the world's No. 2 copper producer. The project's environmental impact study was approved years ago, but community opposition has delayed its development.

Brokering a deal on Quellaveco would mark a small victory for Valdes, who has been sharply criticized for failing to resolve the dispute over Newmont's project in Cajamarca. Five people have died in clashes with police this month.

Political opponents say Valdes and President Ollanta Humala have been too quick to suspend civil liberties and back mining firms over citizens. Valdes has called the protesters in Cajamarca "extremists" and blames local officials for inciting violence for political gain.

Anglo American expects to break ground on Quellaveco later this year and construction would take 44 months.

Edited by: Reuters

Mitsubishi to help defuse Anglo, Codelco row - sources

Japanese trading house Mitsubishi could cede part of its stake in coveted Chilean copper properties to solve a bitter row between Anglo American and Codelco, sources said, as the miners sought more time for talks.

Codelco, the world's largest copper producer, said on Thursday that the parties would seek to extend until mid August a break from litigation that was due to end on July 17, adding that a deal had not yet been clinched.

Sources familiar with the matter said one option on the table would involve Mitsubishi reducing its share in Anglo's prized Sur properties in south-central Chile, which could give room for Codelco to buy a larger stake in the assets.

"It is possible Mitsubishi could sell some of its stake," one of the sources familiar with the matter said.

A source familiar with Mitsubishi but not directly involved in the Chilean negotiations said the trading house took a long-term view and would be "open to compromise", including giving up part of its stake to ultimately boost Codelco's holding.

"They would (consider it) if this was the key to unlocking the situation," the second source said.

State-owned Codelco, which has been at odds with Anglo since October, declined to comment on possible deals to end the dispute. "If Mitsubishi was to give up part of its interest, you'd think Mitsubishi wants to profit in some way; its not a benevolent move," analyst Des Kilalea at RBC Capital said.

"The overriding thing is that a solution that is negotiated is positive providing the valuations make sense."

Anglo and Codelco have been at odds since last October over an option to buy a 49% stake in Anglo American Sur (AAS).

Codelco said in October it would exercise the option to buy the AAS stake when the option window opened in January this year and secured funding from Japan's Mitsui & Co. But weeks later, Anglo surprised the market and Codelco with the pre-emptive sale of a 24.5% stake in AAS to Mitsubishi, in a $5.4-billion deal that dented Chilean hopes, but which Anglo said secured better value for investors.

SELLING BACK

The sources said that among the possibilities being negotiated, Mitsubishi would sell down that 24.5%. Even a small stake could potentially prove a face-saving solution for Codelco, which would then have the largest share after Anglo.

"Legal matters can be undone in the same way they are done. There's no legal problem in doing a sell-back," said Inigo de la Maza, a law professor at the Universidad Diego Portales in Santiago.

"The problem is more economic. What happens with what was already paid? What happens with the other obligations?"

Several sources said new Codelco CE Thomas Keller - considered by some analysts to be more amenable to a deal than his predecessor - was in Japan last month for talks, as was Anglo.

Chilean newspaper La Tercera said Mitsubishi could cede 5% of its 24.5% stake in the asset to make room for Codelco to buy 29.5%.

But the sources told Reuters on Thursday that the two sides were still talking, while Codelco dismissed reports on the details of a deal as "journalistic speculation."

Codelco, Mitsubishi and Anglo American all declined to comment on a potential solution involving Mitsubishi.

"Discussions are confidential and ongoing," an Anglo spokesperson said.

Anglo's Los Bronces, part of the disputed unit, could at its peak be the world's fifth-biggest copper mine and stands out in a red-metal market defined by a lack of new deposits. Anglo expects its ramped-up mine to more than double annual copper output from 2010 levels in its first three years of full production, before ebbing on dwindling ore grades.

It could produce as much as 490 000 t/y. A slice of the prized properties would be a major boost for Codelco - which faces dwindling ore grades in its own deposits - as it seeks to boost its yearly output to over two-million tons by 2020.

Monetary compensation would also be welcome as Codelco builds up its massive investment plans. Anglo shares closed 2.21% lower on Thursday, outperforming a 2.78 percent fall on the broader FTSE 350 mining index.

Edited by: Reuters

Tuesday, July 10, 2012

Construction permits last hurdle for Anglo's Peru copper mine

Anglo American is in dialogue with Peru's government to obtain all relevant permits to start construction of its Quellaveco project which was postponed because of community opposition.

Global mining firm Anglo American hopes to begin construction on its $3 billion Quellaveco copper project in Peru "as soon as possible," the firm's country manager said on Monday.

Anglo American says it has secured the support of local communities and is waiting for construction permits from President Ollanta Humala's government, which is struggling to resolve a deadly dispute over Newmont Mining's proposed $5 billion Conga gold mine.

Quellaveco would produce 220,000 tonnes of the red metal per year, about a fifth of Peru's 2011 copper output. The project's environmental impact study was approved years ago, but construction has been postponed because of community opposition.

"We are in the dialogue process... we are seeking the relevant permits and hope these can be obtained as soon as possible," Luis Marchese, Anglo American's General Manager in Peru, told Reuters.

Neighboring communities now support the firm's water usage plan, he said, and Anglo American is waiting for the government's ministry of energy and mines to approve construction permits for Quellaveco.

Water is often a source of conflict in the world's No. 2 copper producer. Farmers fear companies will pollute alpine lakes or use up scarce water resources they need for their crops.

Official data shows at least 15 people have died during Humala's term in protests over natural resources while 174 were killed in similar circumstances from 2006 to 2011 on the watch of his predecessor, Alan Garcia.

The government suspended civil liberties in northern Cajamarca, near Newmont's Conga project, last week after clashes between protesters and police turned deadly.

Critics said the government was too quick to give up on mediation and resort to force. Negotiations with local government officials over Conga, the largest mine ever attempted in Peru, were scheduled to resume later on Monday.

Anglo American hopes to begin construction later this year on Quellaveco, located in the southern region of Moquegua, Marchese said. Construction will take 44 months.

"We are maintaining our start date," he said. "We hope to have good news soon."

Anglo American operates the Collahuasi mine in neighbouring Chile, the world's top copper producer, with Xstrata Copper. It is also trying to settle a multi-million dollar dispute with Chile's state-run Codelco.

Source: Reuters

Thursday, July 5, 2012

Chile’s Codelco to invest $400 million in molybdenum plant

Chile-owned copper giant Codelco plans to invest $400 million in a molybdenum processing plant to maximize its market value amid a legal dispute with global miner Anglo American.

In an interview with local newspaper La Tercera, CEO Thomas Keller (photo) said the company, the main copper producer worldwide and world's No 2 molybdenum miner, is adding value to its business.

“We're paving the way to consolidate Codelco as the second- and first-biggest producer of molybdenum in the world," Keller said.

In 2011, Codelco sold 22,800 tonnes of the metal used to harden steel and will ramp up production of molybdenum once it coverts its Chuquicamata mine to an underground operation.

“The [Chuquicamata] project will allow us to directly sell a good chunk of our molybdenum production as commercial molybdenum because what we sell currently is molybdenum concentrate,” Keller added.

Asked about Codelco's dispute with Anglo American over copper assets in southern Chile, the executive said he is committed to achieving an agreement with Anglo and that hopes a long court trial can be avoided.

Read more on the conflict between Anglo American and Codelco >> >>