Anglo cuts 2009 capex to $4.5b and possible job cuts

Anglo American will cut its capital spending by more than half, ranging from platinum in South Africa to iron ore in Brazil and there could be possible job cuts.

LONDON (Reuters) - 

Miner Anglo American Plc will slash capital spending next year by more than half to $4.5 billion, while other firms linked to the sector reported knock-on impacts from a collapse in metals markets.

Anglo, the world's fourth-biggest diversified mining group by market value, said on Wednesday it would cut the previous capex level of about $10 billion by delaying expansion projects ranging from platinum in South Africa to iron ore in Brazil.

"We have taken decisive action as a result of the fast changing economic climate and have undertaken a thorough re-evaluation of our stay-in-business and development requirements," Chief Executive Cynthia Carroll said.

Anglo joins other major mining groups such as Rio Tinto cutting spending to survive the global downturn that will curb profits and cash flow.

The sharp downturn in metals markets, which has seen the UK mining index shed two-thirds of its value since July, is now spreading to other firms linked to the sector.

Finland's Outotec said on Wednesday orders for its mining technology products were faltering, forcing it to cut its forecast for its year-end order backlog to 1.2 billion euros from a previous estimate of over 1.32 billion.

"Several customers have put on hold large investments until the market exhibits a pattern of stability before they continue with their final decision-making," the company said.

In Germany, copper smelter Norddeutsche Affinerie said it expected sharply weaker results in its fiscal first quarter as lower copper prices triggered write-downs on inventories at its Cumerio unit.

It forecast that business would stabilise at weaker levels in the course of the year.

POSSIBLE JOB CUTS

Analysts said Anglo's capex cuts were in line with expectations and noted that Anglo did not announce any job cuts after Rio slashed 14,000 posts or 13 percent of its workforce.

"Whilst the capex cuts seem to be sensible they have not been accompanied by production cuts in platinum nor a big one off cost cutting exercise so we feel this is no Rio event," said analyst Michael Rawlinson at Liberum Capital in London.

Anglo spokesman James Wyatt-Tilby said the group was talking to trade unions and governments about the possible impact on jobs.

Rio shares surged last week after it assured investors it would have enough cash to make payments on its heavy debt load.

Anglo shares were up 1.9 percent to 1,595 pence by 1029 GMT, compared with a 2.15 percent gain in the UK mining index.

The shares have shed about half their value this year, outperforming the UK mining index by 14 percent.

In July, when it released interim results, Anglo said it had a project pipeline worth $45 billion, including $15 billion of approved projects currently under development.

At its South African Anglo Platinum unit, capex will fall to $900 million by deferring spending on projects such as Twickenham, Styldrift and building a new shaft at the Amandelbult mine.

Platinum output will be barely affected, and Shoaib Vayej, resources equity analyst and portfolio manager at Sanlam Investment Management in South Africa, said he expected more aggressive cutting at Angloplat.

"Without downsizing operations and continuing to under-produce, it definitely makes them an inefficient producer and exposes them that way."

In ferrous metals, capex will also be $900 million and in base metals it will be $1.3 billion, with delays for the Minas-Rio iron ore mine in Brazil and the Bronces expansion project in Chile.

The price of copper, Anglo's most important metal, has tumbled 65 percent since touching a record high in July.

Anglo's base metals division, of which the main metal is copper, was the biggest profit driver in the first half, accounting for 41 percent of operating profit.

Anglo said its net debt at the end of 2008 is expected to be about $11 billion, representing a gearing level of about 30 percent. It will have major debt repayments of a $3 billion bank facility in December 2009 and a 300 million pound Euro bond in December 2010.

The group said it has cash and undrawn bank facilities of about $7 billion.

© Reuters 2008. All Rights Reserved

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