South32 Ltd., the aluminum to manganese producer spun out of BHP Billiton Ltd., is the latest mining company to flag asset writedowns as commodity prices tumble to the lowest in 13 years.
The producer, created in mining’s biggest spinoff in almost a decade, said Wednesday that BHP had estimated pre-tax impairments of $1.9 billion on the value of South32’s manganese and thermal coal operations.
South32 joins BHP and Anglo American Plc in flagging charges as commodity prices tumble. The Bloomberg Commodity Index of 22 raw materials from silver to gas has plunged to the lowest since 2002 amid faltering demand in China, the biggest consumer of energy to metals.
“There’s no doubt that we are seeing pressure on commodities,” Chris Drew, a Sydney-based analyst with RBC Capital Markets said by phone. “The writedowns are largely what we might have expected.”
Perth-based South32, which began trading in May, is conducting its own valuation of the assets ahead of financial results to be published next month and “will keep the market informed should there be a material difference,” to BHP’s assessment, it said in the statement.
BHP, the world’s biggest mining company, sees weak metals prices persisting with several markets in oversupply, Chief Executive Officer Andrew Mackenzie said last month.
South32 declined 2.2 percent to close at A$1.785 in Sydney, while the resources index fell 2 percent.
Anglo said last week it expects to record non-cash impairments of $3 billion to $4 billion on its Minas-Rio iron ore operation in Brazil and some Australian coal assets, while BHP anticipates it will book charges of about $2 billion against its U.S. shale assets, $2.1 billion on South32 and as much as $650 million on businesses including copper.
South32, the world’s biggest producer of manganese ore, last month delayed the planned restart of three ferromanganese furnaces in its Samancor venture with Anglo in South Africa and flagged a potential writedown. The $1.9 billion of impairments largely offsets an earlier valuation increase on the Australian and South African manganese businesses of $2.1 billion, South32 said.