Global miner Anglo American on Thursday cut its capital expenditure guidance for the year by about $1 billion and said it would cut costs to weather the impact of the coronavirus.
Anglo’s exposure to South Africa, which accounts for about half of its profits, has forced the company to cut spending and reduce costs after the government imposed lockdown measures to slow the spread of the novel coronavirus.
The coronavirus lockdown measures were the main reason for a 4% decline in the group’s first-quarter production, where platinum, palladium, iron ore and diamond output fell.
“The prevailing measures to deal with COVID-19 and economic uncertainty are likely to result in delays to both project approvals and commissioning of certain in-progress projects,” the company said.
Operations in South Africa were now operating at 50% capacity and the miner revised down its 2020 output guidance for thermal coal, platinum, palladium and iron ore and diamonds.
Production increased in Brazil, where the Minas-Rio mine increased output by 31% to 6.4 million tonnes in the first quarter. Nickel was the only other commodity to show an increase in the quarter as all others recorded declines.
But Anglo´s sprawling Los Bronces copper mine in Chile, outside the capital Santiago, saw output tumble 25% to 68,700 tonnes, battered primarily by a worsening drought in the region.
“The central zone of Chile continued to confront climatic conditions without precedent,” the company said in a statement.
Anglo was among the miners hardest hit by a slump in commodity prices in 2015-16, but it has been one of the strongest performers since then owing to a rebound in prices, technology and operational improvements.
Now the coronavirus has forced the industry as a whole to tighten its belt again but most mining companies have stronger balance sheets and analysts regard them as less at risk.
“Anglo appears to be facing more impacts from Covid-19 as compared with peers both operationally, and in the case of diamonds, market based,” said RBC Capital Markets analyst Tyler Broda, but he said the company’s balance sheet remained resilient.
Anglo’s shares in London rose 2.38% by 1520 GMT, in line with an index of its peers.
Anglo said it had identified costs savings of about half a billion dollars in addition to benefiting from weaker producer currencies and a rout in oil prices.
Capital expenditure will be reduced by about $1 billion to $4-$4.5 billion, Anglo said, adding that the cuts may impact spending in future years.
Some costs cuts would come from restrictions in discretionary spending, lower central overheads and deferrals in explorations activity, Anglo said in a statement.
Anglo said it had liquidity of $14.5 billion at the end of March. The miner said it would go ahead with paying its planned dividend in May. Its peer Glencore deferred its decision to pay a dividend in light due to coronavirus concerns.
Work on Anglo’s Quellaveco copper project has been stopped for up to three months due Peru’s nationwide quarantine measures but said it still expected first production in 2022.
The project, a major growth project for Anglo, is now expected to cost at the upper end of an original $5-5.3 billion.
(By Zandi Shabalala and Fabian Cambero; Editing by Jane Merriman and Nick Zieminski)