By Clara Denina and Felix Njini
LONDON (Reuters) -Global miner Anglo American (JO:AGLJ) aims to cut capital expenditure by $1.8 billion by 2026, it said on Friday, as it grapples with a fall in demand for most of the metals it mines and a writedown for its British fertiliser project.
Anglo joined peers including Rio Tinto (LON:RIO),, Teck Resources and Glencore (LON:GLEN) in reporting lower profits and returns in the first half of the year, as lacklustre economic growth hit commodity prices.
Anglo, however, has underperformed its London peers, with a 36% drop in its share price so far this year. Shares were down 7.5% by 1110 GMT, making the global miner the biggest loser among the FTSE 100.
The London-listed miner, which had already targeted saving $500 million by cutting corporate jobs and some costs including at head offices in Johannesburg and London, aims to cut an additional $500 million by 2024.
"In the near term, given continuing elevated macro volatility, we are being deliberate in reducing our costs and prioritising our capital to drive more profitable production on a sustainable basis," Chief Executive Duncan Wanblad said in a statement.
Sources familiar with the matter told Reuters on Thursday that Anglo was preparing sweeping cost cuts.
Global economic weakness has lowered the demand outlook for some metals.
Peers Antofagasta (LON:ANTO) and Glencore for example cut production guidance for copper and nickel respectively this year.
Anglo American said on Friday it will reduce production at its South African unit Kumba Iron Ore, where stockpiles had grown to 9 million metric tons by September following worsening rail bottlenecks.
Its cost-cutting measures also include focusing on higher-margin production for its platinum group metals (PGMs) operations in South Africa and putting one processing plant at its Los Bronces copper mine in Chile on care and maintenance.
"The company has significantly reduced its production profile for 2024-26, missing consensus estimates by 13-19% (in copper), largely on account of larger cuts of unprofitable volumes at Los Bronces," Morgan Stanley (NYSE:MS) analysts said.
"First take - we see 10-15% downside risk to our 2024 EBITDA forecasts as a result of today's update," they added.
Anglo's core profit is expected by a group of 11 analysts to be at $10.2 billion in 2023, down from $14.5 billion last year.
Anglo said it is reviewing its operations at Anglo American Platinum.
"If we cannot see sustainable value on every ounce we mine, then we'll take those ounces out," Wanblad told investors, referring to the platinum business.
Amplats' CEO Craig Miller said in a separate call that the review of its entire cost structure will try to ensure the unit's assets are placed at the lower half of the cost curve to make the business profitable even at current lower prices.
Overall production across the resources Anglo mines will be reduced by 4% in 2024, taking unit costs down by 2%, it said.
Capital expenditure in 2024 will be around $5.7 billion, $800 million lower than previously expected.
Anglo is developing the $9 billion Woodsmith fertiliser project in Britain for which it announced a $1.7 billion writedown in February.
Asked on Friday whether Anglo would be open to find other investors in Woodsmith, Wanblad said:
"The syndication process is something that we will do and will be done at the right time and for value, given an asset of this nature."