By Alex MacDonald
LONDON--Anglo American PLC (AAL.LN) said Monday it will take an
impairment charge of $0.3 billion after withdrawing from Pebble, a
massive, environmentally-contentious Alaksan copper-and-gold
venture, in favor of prioritizing high-value, low risk
projects.
"Despite our belief that Pebble is a deposit of rare magnitude
and quality, we have taken the decision to withdraw following a
thorough assessment of Anglo American's extensive pipeline of
long-dated project options," said Mark Cutifani, who took over as
CEO of Anglo American in April.
He said that Anglo is focused on prioritizing capital to
projects with the highest value and lowest risks. He also said it
wants to reduce the capital required to maintain projects in its
pipeline. Anglo American said it expects to record a post-tax
impairment charge of $0.3 billion this year as a result of its
withdrawal from the project.
The globally-diversified miner, which owns Pebble in equal share
with Canada-based Northern Dynasty Minerals Ltd. (NAK), had
invested just over $500 million of the $1.5 billion it committed to
in 2007.
The FTSE-100 company made the investment at a time when a
near-decade long mining boom had pushed miners to look for new
deposits in more remote areas of the world. However a recent
downturn in prices for many commodities, including copper, have
prompted many large miners such as Anglo and Glencore Xstrata PLC
(GLEN.LN) to review their project pipeline with a view to cutting
costs and prioritizing those projects that generate the most
attractive returns the quickest.
Pebble, one of the world's largest undeveloped gold-and-copper
deposits, has already faced several years of protests from
activists who allege it could harm an important spawning habitat
for wild sockeye salmon, as well as damage communities around
Bristol Bay that depend on fishing.
Anglo and Northern Dynasty Minerals had countered by saying that
the project would bring significant economic benefits to the region
and could co-exist with Bristol Bay's fisheries without
environmental harm. Anglo American had also previously said it
would only go ahead with the project if it was environmentally
sound.
A preliminary assessment detailed in a June presentation by
Northern Dynasty showed that Pebble would cost about $4.7 billion
to develop, with construction possibly starting in 2017 and
commercial production starting in 2021. Pebble is expected to
produce an average of 678 million pounds of copper and 673,000 troy
ounces of gold over a 45-year lifespan, according to Northern
Dynasty.
The initial estimate includes a plan to build an open pit mine,
although no decision has been taken to go ahead with the
project.
Rio Tinto, which holds about a 10% indirect stake in the project
through its 19.8% holding in Northern Dynasty, had previously said
it would only support Pebble if it were an underground mine, not
open pit. Sam Walsh, Rio Tinto's new CEO, said in April that a
"huge amount...needs to be done to prove or disapprove that the
project can be built in a way to meet our standards."
-Write to Alex MacDonald at alex.macdonald@wsj.com
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