Anglo American takes $3.9 billion charge on sliding iron ore

Anglo American on Friday announced a write-down of $3.9 billion caused by the sliding price of iron ore which has slashed the value of its Minas-Rio mining project in Brazil. In an annual earnings update, mining giant Anglo American announced "commodity price-driven impairments of $3.9 billion (3.4 billion euros), including $3.5 billion at Minas-Rio".
The Anglo-South African company had purchased the Brazilian project around the time of the financial crisis for $4.8 billion to secure key supplies of iron ore - a metal used to make steel.
Two years ago, it announced a $4.0 billion hit on the value of the project owing to delays that sent costs soaring.
Although the company managed last year to ship its first ore from the Minas-Rio project, "the steep drop in the iron ore price has resulted in a $3.5 billion post-tax write-down", Anglo American chief executive Mark Cutifani said in Friday's results statement.
Consequently, the miner posted a net loss of $2.51 billion for 2014 compared with a post-tax loss of $961 million in 2013.
Iron ore prices slumped 47 percent in 2014, pulled lower by a global supply glut and weaker demand from a slowing China.
Shares in Anglo American Friday rallied 3.43 percent to 1,205.50 pence on London's benchmark FTSE 100 index, which was up 0.57 percent to 6,867.16 points around midday in the British capital. Anglo's performance mirrored a strong showing across the commodities sector on Friday.
"A three-week high for the FTSE 100 finds the index on the cusp of 6,900 once again, as a general resurgence in mining shares comes despite hefty write-downs from Anglo American," said Chris Beauchamp, senior market analyst at IG trading group.
He added that although "the mining sector is not for the faint-hearted. . . monetary stimulus from China could reignite enthusiasm for commodities and lift them from their current doldrums". Anglo American's platinum unit Amplats said this week that a lengthy strike at its South African mines squeezed earnings last year, but it still managed to achieve a net profit thanks to fewer write-downs.