Anglo American (AAL) is up 2% to £19.13 despite announcing a $4 billion writedown on its troubled Minas-Rio iron ore project in Brazil (29 Jan) which it hopes to startproduction in 2014. This is the because the bad news had been anticipated and already discounted in the share price.
The FTSE 100 miner last year warned that capital expenditure (capex) would increase beyond $8 billion. Delays and cost over-runs have now seen that figure hit $8.8 billion.
The project's difficulties are seen as one of the contributing factors behind the departure of chief executive officer Cynthia Carroll who will leave in April, to be replaced by AngloGold Ashanti boss Mark Cutifani.
Anglo American took control of the asset in 2008 at the peak of the commodities market, paying $5.5 billion to acquire the iron ore project from Brazil's MMX. Its problems are indicative of the large cap mining sector as a whole. Natural resource groups are paying for the price for over-ambitious acquisitions which analysts now say have destroyed shareholder value.
Rio Tinto (RIO) saw its chief executive Tom Albanese quit on 17 January following $14 billion impairments to the miner's aluminium and coal businesses. JPMorgan bank calculates that Rio has now written down the value of its assets by $35 billion since 2007.
BHP Billiton (BLT) took a $3 billion writedown in 2009 to its failed Ravensthorpe nickel project in Australia and last year impaired its US shale gas assets by $2.8 billion.
First Quantum Minerals (FQM) has since bought Ravensthorpe at a knock-down price and made it a successful operation.