Anglo American Takes A $1.6B Hit On Woodsmith, Ends First Half In The Red

Anglo American plc AAUKF announced a $1.6 billion writedown on its Woodsmith fertilizer project in the U.K. This setback adds further complexity to CEO Duncan Wanblad‘s strategy of revitalizing Anglo after successfully defending it against a $49 billion takeover bid from BHP.

In May, management unveiled a comprehensive restructuring plan with an 18-month timeline. The plan focuses on divesting three units: De Beers (diamond mining), Amplats (platinum operations) and coal assets.

This strategic shift aims to concentrate efforts on core strengths: copper, iron ore, and crop nutrients (represented by Woodsmith), which Wanblad confirmed, per Reuter's report.

Despite the project's strategic significance, this is not its first writedown. The company took a $1.7 billion hit a year ago due to extended timelines and rising costs.

Also Read: Freeport McMoRan Bets On Growth, Plans $7.5B Expansion In Chile

The company’s earnings report revealed a $672 million loss for the year’s first half, primarily due to the Woodsmith impairment. This contrasts sharply with a $1.26 billion profit from the previous year. Revenue for the first half of 2024 dropped by 8% to $14.5 billion, while underlying profits fell by 23% to $1.29 billion.

Anglo American’s interim dividend declined to $0.42 per share from $0.55 a year earlier, marking a decrease of approximately 24%. Production guidance for most of the portfolio was reiterated. However, expectations for De Beers' production were lowered for the second time this year to 23-26 million carats from an earlier forecast of 26-29 million carats.

In the wake of BHP's unsuccessful bid, the management is navigating through divestment challenges — notably a major fire at the Grosvenor mine in Queensland, Australia.

The Grosvenor fire delayed the two-stage auction process for the coal assets, which CEO Wanblad acknowledges will likely resume operations only under new ownership. The mine, a significant asset within Anglo’s steelmaking coal business, accounts for about 30% of this segment’s $4.5 billion value.

Despite the setbacks, Wanblad remains optimistic about Anglo American's core divisions, copper and iron ore. These two mainstays, along with Woodsmith, contributed approximately 70% of the company’s earnings. He also expressed encouragement for the company's operational performance.

"[We] delivered steady volumes and a 4% improvement in unit costs while still facing weak cyclical markets for platinum group metals and diamonds," he noted.

Read Next:
• EXCLUSIVE: Mining Legend Robert McEwen — ‘Investors Should Be Aware That There Is Cyclicality And Seasonality’

Benzinga Mining is the bridge between mining companies and retail investors. Reach out to licensing@benzinga.com to get started!

Photo: Courtesy Anglo American via company Flickr site