Anglo American shares suffer biggest one-day fall since financial crisis

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Anglo American’s shares suffered their biggest one-day fall since the financial crisis in 2008 after the company revealed plans to slash mineral production to cut costs and boost profitability.

Shares tumbled 19 per cent to £18.02 by the market close on Friday — the lowest level in three years and a 44 per cent drop since the start of the year.

The fall compounded the company’s woes as the worst-performing stock of the large diversified mining groups including BHP, Rio Tinto and Vale.

The FTSE 100 group said the production cuts would help lower capital expenditure by $1.8bn between 2023 and 2026 and reduce costs next year. 

Its plans include cutting production at its Kumba iron ore operations in South Africa and going down to one plant at its Los Bronces copper operation in Chile.

Anglo American’s chief executive Duncan Wanblad has encountered difficulties including commodity prices slipping from record highs and production snarls since he took over from Mark Cutifani in April 2022.

“A lot has changed in the past 18 months,” Wanblad told investors. “We are live to these near-term challenges and we are responding accordingly. We’ve experienced a period of high and prolonged inflationary pressure that continues to impact costs across the whole of the industry.”

The company has yet to reveal what the production cuts will mean for jobs but other platinum producers in South Africa, such as Sibanye-Stillwater, have unveiled plans to shed thousands of employees.

Anglo American has fared worse than rivals as prices for key commodities in its portfolio such as platinum and palladium — primarily used in catalytic converters that control emissions in cars — and diamonds have been hit particularly hard by the global economic downturn.

The company has been further hamstrung by its exposure to South Africa, which has been hobbled by a faltering power and logistics infrastructure. Almost 8mn tonnes of material has been stockpiled at its Kumba iron ore site because of rail issues.

Lower prices and the disarray in South Africa have affected its platinum group metals business particularly badly, leading Anglo American to say that it would focus on more profitable production using its own feedstock.

Mining companies have been battling surging cost inflation for key inputs such as diesel and explosives. The company anticipates the measures will offset expected price increases, resulting in a 2 per cent reduction in costs in its 2024 financial year.

The production cuts are the latest in a series of actions that the group has committed to this year in order to lower costs next year by $1bn, up from previous plans for a $500mn reduction, through business support cuts and other efficiencies.

While production across the company’s suite of commodities, which also includes steelmaking coal, copper and nickel, is set to rise 3 per cent in 2023, the actions will drag production down 4 per cent next year, it said.

The difficult times for the British company come as it spends billions of dollars building the hugely ambitious Woodsmith mine in North Yorkshire to produce polyhalite, a new fertiliser product with an unproven market size.

Taking advantage of the company’s shares dipping close to a three-year low, Norges Bank has raised its stake in the mining group to 3 per cent, up from just over 2 per cent, a separate filing said on Friday.