Charlotte Mathews
18 December 2008
Johannesburg — ANGLO American yesterday became the latest of the world's top international resources groups to slash capital spending and defer new projects in response to sharp falls in commodity prices.
Anglo said it would halve its capital spending to $4,5bn next year, mainly by rescheduling development projects.
Output of most of its major products next year would be similar to this year's.
Anglo's share price responded positively to the news, rising 6% to R249,51 by close of trade.
Rio Tinto, which took on substantial debt after merging with Alcan, said two weeks ago it would eliminate 14000 jobs worldwide and halve capital spending. BHP Billiton, Xstrata and Vale have also announced cutbacks in operations.
The recent "unprecedented period of rapid declines in commodity prices" presented a very different short-term outlook, Anglo said, but it retained its confidence in the medium to long-term fundamentals of its core commodities.
Investec Asset Management portfolio manager Daniel Sacks said Anglo's announcement was not as drastic as Rio Tinto's.
Anglo was cutting future expenditure, not current capacity, except in metallurgical coal, and had not announced job cuts.
But Anglo had not mentioned its dividend plans, whereas Rio Tinto had promised to maintain its dividend. Sacks said Anglo was unlikely to cut its dividend this year, and had said previously it was committed to a progressive dividend policy.
Anglo American spokesman James Wyatt-Tilby said Anglo's board of directors would consider the payment of the dividend in February, as it did every year.
He said Anglo could not yet predict the effect on head count, but it would act responsibly and in consultation with the governments and unions.
Billiton's production cuts announced were less than Anglo's or Rio Tinto's, Sacks said, since Billiton was almost debt-free and its production was at the lower end of the cost curve. But he said Billiton was also likely to cut back on some of its capital spending plans.
Anglo Platinum, which is 79%-owned by Anglo American, said refined platinum production next year would be 2,4-million ounces, in line with its latest forecast for this year.
The original target for next year was about 2,7-million ounces.
Angloplat said it would spend only $900m on capital projects next year, deferring projects such as Amandelbult No4 shaft, Twickenham, Styldrift and a second furnace at Waterval.
Anglo American's base metals production would be maintained at the same levels as this year except for its copper output, which would rise 5%. The division would cut next year's capital spending to $1,3bn by delaying projects at Los Bronces in Chile and Barro Alto in Brazil.
In ferrous metals, Kumba Iron Ore's production would rise about 10% next year, but the division's capex would be reduced to $900m, including $425m at Kumba, by delaying the commissioning of the Minas-Rio project in Brazil for up to a year.
The coal division had dropped plans to increase metallurgical coal output 10% next year, and spending on capital projects would fall to $400m.
Wyatt-Tilby said that original capex budgets for each of the four divisions for next year were not disclosed, but the 50% cutback was spread across the group.
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