WARSAW, Feb 8 (Reuters) - Poland’s KGHM, Europe’s second-biggest copper producer, on Monday flagged more than $1 billion in writedowns on key foreign assets, including the Sierra Gorda mine in Chile, due to plunging metals prices.
The company said the writedowns will not impact its dividends and credit covenants, adding that it has begun revising its 2015-2020 strategy to significantly reduce capital needs in the short and medium term.
The move is the latest in a series of writedowns on resource assets and downgrades of earnings forecasts by miners in the face of a global commodity slump.
Last week Sierra Gorda’s co-owner, Japan’s Sumitomo , said it cut its profit forecast due to the investment loss at the Chilean mine in the face of falling metal prices and its late production start-up.
KGHM on Monday recognised a $494 million loss following an asset impairment test prompted by persistently low commodity prices. Copper prices fell to their lowest since mid 2009 last month.
It also announced a $510 million loss on its investment in the Sierra Gorda SCM firm that owns the Sierra Gorda mine, bringing its total consolidated impairments for the year to $1.04 billion.
State-run KGHM said last month it would have to run an asset impairment test the face of the commodity rout.
The company gained control of Sierra Gorda in 2011 when it bought Canadian rival Quadra FNX for C$2.87 billion ($2.07 billion), the largest ever foreign acquisition by a Polish company.
According to Sumitomo, Sierra Gorda produced about 85,000 tonnes of copper concentrate in 2015 and aims to reach full utilisation by the end of June. ($1 = 1.3882 Canadian dollars) (Reporting by Adrian Krajewski and Marcin Goettig; Editing by Jan Harvey)