As a result of the global economic slowdown, the second half of 2008 saw markedly lower commodity prices, following several years of highly supportive prices. Across the industry, there has been curtailment of some high cost operations in markets where prices and demand have declined significantly, for example in nickel, platinum, iron ore and coking coal. We expect the difficult credit environment to continue to impact the funding of many potential new mines and expansions, thereby further constraining supply when economic growth returns.
The world economy faces an unprecedented level of uncertainty and the outlook remains poor in the near term, with expectations for continuing volatility and weakness in commodity prices. It is against this backdrop that Anglo American has taken a series of measures to ensure that the Group’s operating and cost profiles are appropriate and that its balance sheet and capital structure have sufficient flexibility through the current downturn. However, over the medium to long term, Anglo American believes that the fundamentals of its core commodities remain attractive, with significant value to be created by the Group’s long life, low cost growth projects, several of which are timed to enter production from 2011. The economic recovery of the OECD member countries and the ongoing industrialisation of the world’s major developing markets are expected to drive long term demand for commodities, stimulated further by government spending programmes in many major economies, including the US and China.
In summary, Anglo American has a world class asset base with long life, low cost mines and a strong and geographically diverse project pipeline across the most attractive commodity segments. We have taken decisive action to position Anglo American through the downturn and we expect to emerge in robust shape, ready to capitalise on the next phase of economic growth.