ANGLO American kept a tight lid on its proposed Woodsmith fertiliser project in northern England saying that the results of detailed planning would only be released next year after in December allowing for an extra year to study it.
“There is nothing wrong with it,” said Duncan Wanblad, CEO of Anglo American today following the publication of the firm’s interim results. “We will hold the line in making sure we get it right before we approve it.
“We are looking through its configuration and risks. Will give the market an update early next year and a final cost estimate when ready to approve the project,” he said.
Anglo bought Woodsmith’s owner Sirius Minerals for £405m in 2020 saying it would take two years to run a feasibility on the project. About $700m has been set aside this year in order to sink two shafts and construct a mineral transport tunnel at the project.
If commissioned, the project will produce polyhalite, a type of fertiliser product that has potassium as one of its fundamental elements but is not potash. Wanblad said currently the fertiliser market was “tight”. Russia and Ukraine, currently in conflict with one another, control about 35% of the world potash supply market.
“This is an incredible project,” said Wanblad. “We bought it as we were deeply compelled by the orebody. It is one of the most magnificant I’ve come across and our ability to leaverage our technical and operating management capabilities into it are absolutely perfect,” he said.
Wanblad compared Woodsmith’s development to Quellaveco, its recently commissioned copper mine that cost Anglo $5.3bn to develop with its partner, Mitsubishi. “We have taken a very hard line on how to develop projects. We did four feasibilities on Quellaveco before taking to the board and getting approval. Woodsmith needs to be right,” he said.
Stephen Pearce, Anglo CFO, played down the prospect of a major capital overrun at Woodsmith as a result of the time Anglo has given itself to study the project. Anglo’s cost inflation rose 7.2% in the six months ended June compared to about 3% previously.
“The equipment is already on site,” said Pearce. “Spending is about people, time and engineering. Hopefully when we get to the other spend we will be in a different inflationary environment,” he said.
Quellaveco had started to produce its first copper and would begin shipments in the current quarter once it was licensed to do so. Wanblad said he was comfortable with production in Anglo’s current financial year of 100,000 to 150,000 tons of copper. The project is scoped to produce 300,000 tons of copper.
It was an example of Anglo’s growth ambitions but Wanblad said there was no intention to “hoover up” new projects through merger and acquisition activity if they were low quality. “This is definitely not the time to lose discipline,” he said of deal-making.
