HONG KONG — Rising operating costs and slumping commodities prices continue to create problems for global mining firms.
The latest company to come under pressure is Newcrest Mining, Australia’s biggest gold miner, which said Friday that it would write down about 6 billion Australian dollars, or $5.7 billion, worth of assets and scale back planned spending on exploration and new projects.
Newcrest, which has gold mines in Australia, Papua New Guinea, Indonesia and Ivory Coast, said its moves were because of “the current market environment and outlook, including a recent sharp deterioration in the gold price, the largest in 30 years.” The company also blamed rising costs and the strong Australian dollar.
Major miners of ore and other raw materials have been drastically scaling back spending and dropping plans for new projects in recent months. BHP Billiton and Rio Tinto, two of the world’s biggest mining companies, both announced the departure of long-serving chief executives early this year after a number of financial setbacks.
While revenue at the world’s 40 biggest mining companies in 2012 was basically unchanged from the previous year at $731 billion, net profits fell by 49 percent, to $68 billion, according to a report released Friday by PricewaterhouseCoopers. Forecast 2013 capital expenditure by the companies of $110 billion is 21 percent lower than last year’s spending, the report said.
“While longer term demand fundamentals remain, mining companies need to handle rising costs, increasingly volatile commodity prices and other challenges such as resource nationalism in order to regain investor confidence,” Ken Su, the China mining practice leader at PricewaterhouseCoopers, said in a news release accompanying the report.
Producers of a wide range of metal products are also struggling.
On Wednesday, the Aluminum Corp. of China, known as Chalco, said that because of weak market conditions, it would impose a temporary shutdown of 380,000 tons of production capacity, equal to about nine percent of the company’s output of primary aluminum products last year.
Newcrest’s problems are more directly tied to the dynamics of the global gold market. While demand from the two biggest consumers of the precious metal, India and China, is expected to hold steady, the price of gold has been subject to high volatility in recent months.
Spot gold prices have recovered some of the ground that was lost during a sudden, two-day rout in April, when prices fell about 13 percent. But at about $1,410 per ounce, prices for the metal are down 16 percent so far this year and 21 percent since October, when the current downtrend began.
Shares in Newcrest closed down 7.6 percent Friday after it announced plans to reduce capital expenditure in the financial year beginning in July to around 1 billion dollars, down from a previous estimate of 1.5 billion dollars. The company also said it would reduce outlays for exploration by about half, to about 85 million dollars.
Newcrest said it is targeting gold production of 2 million to 2.3 million ounces in the coming financial year, an increase of about 4 percent based on the middle of the range.
Australia was the world’s second biggest producer of gold after China last year, with output of 250 tons.
Article source: http://www.nytimes.com/2013/06/08/business/global/australian-gold-miner-takes-big-hit-as-price-slides.html?partner=rss&emc=rss