By Ross Kelly
SYDNEY--Glencore PLC's (GLEN.LN) Australian-listed iron-ore unit
said it would book a US$240.7 million writedown and shelve
development of a West African mine because of plunging prices for
the steelmaking ingredient.
Sphere Minerals Ltd. (SPH.AU), which is 88%-owned by Glencore,
said it could not develop the Askaf project in Mauritania
profitably at current low iron-ore prices even after intensifying
efforts to reduce operating costs.
"All construction commitments are being closed out, expenditure
minimized, and employment numbers reduced," Sphere said in a
statement.
Glencore has effectively controlled the Askaf project since its
multibillion-dollar takeover of Xstrata PLC in 2013. Three years
earlier, Xstrata had fended off competition from Chinese
steelmakers to acquire a majority stake in Sphere, but wasn't able
to secure enough shares to delist the company from the Australian
Securities Exchange.
Spot iron-prices have roughly halved in the past year to US$58 a
metric ton, as big producers with lower operating costs such as BHP
Billiton Ltd. (BHP) and Rio Tinto PLC (RIO) ramp up supply from
Australia and China's economic growth cools.
Sphere said the impairment charge includes a US$192.5 million
writedown of exploration and evaluation spending that has already
occurred on Askaf. The rest of the charge comprises writedowns
associated with the nearby El Aouj and Lebtheinia prospects.
Write to Ross Kelly at ross.kelly@wsj.com
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