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LONDON, Feb 13 (Reuters) - Global miner Anglo American took a $3.9 billion writedown on Friday after commodity prices tumbled, mainly on its Brazilian iron ore operations, and warned of more headwinds.
The rout on commodity markets that has seen iron ore prices slide by half over the past 12 months has also forced Anglo and other mining groups to slash capital spending and cut costs.
“It’s going to be a tough one or two years. I think the supply we’ve seen on bulk side will weigh heavily on the market,” Chief Executive Mark Cutifani told a conference call.
The company also posted a 25 percent drop in underlying operating profit for last year to $4.9 billion, in line with expectations. Earnings per share fell 17 percent to $1.73.
Anglo warned last month of a likely charge on last year’s results and analysts had pencilled in about $2-3 billion.
The bulk of the impairment, $3.5 billion, was on its Minas Rio mine in Brazil, plagued by delays and cost overruns since Anglo bought it in 2007-2008 for about $5.5 billion.
A flood of iron ore supply from major miners BHP Billiton and Rio Tinto has smothered demand growth and hammered prices in the last year, hitting their smaller and higher-cost rivals.
Other large miners such as Glencore and BHP Billiton are also expected to announce impairments on the back of the oil and metals price rout, but to a smaller degree.
Rio, which derives most of its earnings from iron ore, dodged impairments when reporting results on Thursday, which analysts say was due to the higher quality of its iron ore assets.
Anglo posted annual production results last month, beating its output targets. Production of iron ore, its biggest earner, rose 14 percent to more than 48 million tonnes at its Kumba subsidiary, slightly ahead of its 47 million tonne target. Minas Rio added a further 688,000 tonnes.
Anglo shares rose 2.6 percent in early trading, outperforming a 2 percent gain in the UK mining index . The shares have recovered from a near six-year low of 1,029 pence set last month. (Reporting by Eric Onstad; Editing by Mark Potter)