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Anglo slashes capital spending

Cynthia Carroll,
Chief Executive,
Anglo American
London, England — MININGREVIEW.COM — 17 December 2008 – Anglo American plc – the world’s biggest platinum producer – is to slash capital spending next year by more than half to US$4.5 billion (R46 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 – announced here today that it would cut the previous capex level of about US$10 billion (R103 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,” said chief executive Cynthia Carroll.

Reuters reports that Anglo joins other major mining groups such as Rio Tinto in 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 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.

Analysts said Anglo’s capex cuts were in line with expectations, and noted that Anglo did not announce any job cuts, while Rio was slashing 14 000 posts, or 13% of its workforce.

Anglo spokesman James Wyatt-Tilby said the group was talking to trade unions and governments about the possible impact on jobs of planned cuts in capital expenditure for next year. "We are consulting with them, but it is too early to predict the impact at the moment.”

The company has 190,000 employees at its managed operations in 45 countries.