Metals writedowns since 2008 breach $200bn – Tumazos

Managers in all resources except titanium and fertilizers overestimated volumes and selling prices and underestimated operating and capital costs, says analyst John Tumazos.

In a recent analysis, John Tumazos Very Independent Research attributed metals and mining writedowns to “volatile reversals from the 1975-78, 1982-86, 1997-2003 and 2012-13 commodity price depressions to 2004-08 to 2010-11 ‘Supercycle Euphoria’.”

Mining and Metals Analyst John Tumazos observed that the total of metals write-downs from 2008 to 2013 will breach the $200 billion mark this year.

In his analysis, Tumazos notes, “Since 2008 the break down by sector…is Gold $48.9 billion, Aluminum and Alumina $42.3 billion, Integrated Steel $27.8 billion, Copper $25.9 billion, Nickel $12.8 billion, Met Coal $9.8 billion…Platinum $2.2 billion, Thermal Coal $1.8 billion…Diamonds $1.1 billion, Molybdenum $0.7 billion…Rare Earths $0.3 billion, Uranium $0.3 billion, and Silver $0.1 billion.”

Year-to-date, the 2013 metals total is $19.9 billion of gold and $2.7 billion of nongold writedowns including $900 million for integrated steel, $200 million in iron ore, $500 million in coal, $500 million in energy and $500 million in the others category.

“Some companies reported June 30th results without writing down assets that we view as eventual writedowns by year-end 2015, including Nucor (scrap acqs), Steel Dynamics (scrap acqs), Goldcorp (El Morro cu-au) and Newmont (Conga au-cu). Perhaps we anticipate half of those yet to come,” he observed.

The largest losses from 2008-2013 have been Rio Tinto $36.2B, Barrick Gold $19.4B, Freeport-McMoRan Copper & gold $17.7B, ArcelorMittal Steel $16.6B, BHP Billiton $11.9B, ThyssenKrupp $10.2B, Kinross Gold $10.2B, Anglo American $9.8B, Vale $7.2B, Newcrest Mining $7.1B, AngloGold Ashanti $6.6b, Xstrata $6.6B, Newmont Mining $6B, Kazakhmys $3,8B, Alpha Natural Resources $2.8B, Goldcorp $2.6B, Cliffs Natural Resources $1.8B, Alcoa $1.6B, Glencore $1.5B, Eurasian Natural Resources $1.5B, and Agnico-Eagle $1.2B, according to Tumazos.

In his analysis, Tumazos observed that hedging and the Pascua-Lama project in Chile have contributed most of Barrick Gold’s losses to date. However, bad operations or projects were a minority of Rio Tinto, AcelorMittal, and BHP’s losses.

 “In general, small losses (under $1 billion) involved aged operations, cap ex overruns, no permits, currency shifts or other mishaps,” Tumazos noted. “Big losses usually were big buyouts.

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