Anglo American’s net profit fell by 94 percent to $283 millions last year due to lower metal and diamond prices.
The FTSE-100 miner suffered a disastrous year, as markets for PGMs and diamonds collapsed. It also unexpectedly lowered its copper production forecast. The underlying earnings before interest taxes and other items dropped to $9.96billion from $14.5billion, which was in line with analyst estimates of $9.95billion.
Duncan Wanblad (55), chief executive of the group, stated that they were adopting a value-over-volume mentality to improve returns. “We will continue to review our assets, and take any further action necessary to maintain their competitiveness.”
On the back of lower earnings, the dividend was reduced to $1.2 billion (96 cents per share) from $2.4 billion (198 cents per share) in 2022.
Anglo American, one of the largest mining companies in the world, produces commodities such as copper, iron ore and PGMs. The automotive industry is using up excess palladium and Rhodium that were stockpiled after the Ukraine War to make catalytic convertors for cars.
The company stated that rising interest rates and inflation has affected the confidence of jewellers in purchasing new stock, and consumer sentiment is also weaker in China. De Beers’ rough diamond production, which is owned by Anglo American fell 8 percent to 31.9 millions carats. The average diamond price fell by 25%. The group has written down De Beers’ value by $1.6 billion.
Anglo has reiterated that it will produce between 730,000 to 790,000.0 tonnes of copper in this year. This is lower than the 826.000 tonnes produced last. The Kumba iron ore mining operation in South Africa’s will be reduced due to the long-term logistical challenges. It will then move to a single plant at the Los Bronces Copper Operation in Chile.
The goal of reduced production is to reduce capital expenditures by $1.6 billion from this year until 2026 and operating costs by 1 billion dollars each year.
The company’s share price fell by the most since the financial crisis of 2008. The market value of the group is 44 percent lower than at this time last. This has led to speculation about a possible takeover or activist investors who want to split up the group.
The capital expenditure for this year is $1.2 billion, with $900 million going to the Woodsmith fertilizer mine which will start production in 2027. Woodsmith involves extracting polyhalite – a fertiliser rich in nutrients – from beneath the North York Moors National Park near Whitby and transporting it via a 23 mile tunnel to Teesside for processing. Anglo has spent heavily on the mine, but the board has not yet approved the total costs or made a final investment decision.