Global mining company Anglo American expects to take a writeoff of between $3 billion and $4 billion in its first-half results because of the slide in prices for iron ore and coal, it said on Thursday.
This comes on top of a $3.9 billion writedown Anglo took in February, also due to the rout on commodity markets, when it also posted a 25 percent drop in underlying operating profit for 2014.
The London-listed company has been fighting the impact of a slide in metals prices by trying to improve its mining operations and selling less profitable assets.
"Anglo American expects to record non-cash impairments within special items ... relating to Minas Rio and certain Australian coal assets of approximately $3 billion to $4 billion on a post-tax basis," it said in its second-quarter production report.
Minas Rio is Anglo's newly launched iron ore operation in Brazil, which has been ramping up.
The price of iron ore .IO62-CNI=SI, Anglo's most profitable product last year, has nearly halved over the past 12 months, weighed down by a glut of supply.
Anglo said it decided to take the writedown after further weakness in bulk commodity prices, especially iron ore and coal used to make steel, prompted a reassessment.
"Anglo American has therefore reviewed its near- and longer-term commodity price assumptions at the mid-year, while also noting the gradual and ongoing reduction of consensus prices within what remains a wide range of forecasts."
Anglo, the fifth-biggest diversified mining group by market capitalisation, also said iron ore output at Kumba in South Africa fell by 9 percent in the second quarter year-on-year to 10.4 million tonnes due to mining feedstock issues.
Minas Rio produced 1.8 million tonnes from April to June.
Copper production in the second quarter fell by 5 percent, mainly due to production issues in Chile - temporary shutdowns of the processing plants at Los Bronces to manage water reserve levels and plant stability issues at Collahuasi.
Diamond output fell 6 percent at Anglo's subsidiary De Beers, which last year became the second-largest earner for the company.
Iron ore, diamond and copper last year accounted for 40 percent, 28 percent and 24 percent of its operating profit respectively.http://www.reuters.com/article/2015/07/16/anglo-american-results-idUSL5N0ZW0R220150716
Global miner Anglo American may have to cut its dividend soon as current commodity prices seem to be leaving management little choice but to focus on balance-sheet preservation in order to navigate a sustained downturn.
The decision, likely to be announced while publishing its first-half results at the end of the month, would be the first time since 2009 that the miner has to cut dividends, Bloombergreports.
"The picture as currently presented is not sustainable. Something has got to give: either commodities prices come up or they'll have to cut investment, jobs or their dividend," a banking source told Reuters earlier this month.http://www.mining.com/anglo-american-likely-to-cut-dividend-amid-commodities-collapse/