The Wall Street Journal - 18.03.2020

THE WALL STREET JOURNAL. Wednesday, March 18, 2020 |B5

all car production in Europe,

while Volkswagen AG has shut

factories in Italy and Spain.

The effects on miners have

taken longer to sink in, and

even now the industry contin-

ues to churn out resources. An-

alysts say that will begin to

change as government restric-

tions and concerns for em-

ployee safety lead to more

mine closures, and as compa-

nies adjust production to the

likely falloff in demand.

“The onset of Covid-19 has

introduced a global macro

challenge the likes of which we

have not seen in my lifetime,”

Iván Arriagada, the chief exec-

utive of Chilean minerAntofa-

gastaPLC said while delivering

full-year results Tuesday.

“These are unprecedented

times.”

The spread of coronavirus

has hit miners’ stocks and

bonds hard. Anglo American’s

shares are down 40% this year,

GlencorePLC has fallen 41%

and U.S. copper miner Free-

port-McMoRan has lost over

half its market value.

The cost of insuring these

companies’ bonds against de-

fault has also risen. On Tues-

day, investors were paying

more than $485,989 a year to

insure $10 million of Glencore’s

debt against default for five

years using credit default

swaps, according to IHS

Markit. At the start of the year,

the same insurance for Glen-

core cost $127,000. For Anglo

American, the cost reached

$307,150, up from $84,000.

Antofagasta said it has now

secured extra warehouse space

for its copper in case of can-

celed sales. It has also stocked

up on supplies like spare ma-

chine parts and sulfuric acid.

The company, with one of its

mines located 4,000 feet above

sea level in the Andes moun-

tains, has also severely re-

stricted access to its sites and

is trying to make mines work

autonomously from each other

to reduce the number of people

who have to fly in and out.

Canada’s Agnico Eagle

MinesLtd. has two mines on

the cusp of the Arctic Circle,

around 930 miles north of the

nearest city, Saskatoon. Before

flying into one of those mines,

employees are screened for ill-

ness by medical personnel be-

fore they begin their trip. The

company has placed portable

sinks at the pickup locations

and is spraying aircraft with

disinfectant. Boarding passes

are no longer used so as to

limit opportunities for the vi-

rus to spread.

At all of its sites, the gold

miner has also suspended vis-

its from nonessential visitors

and contractors.

Kinross Goldoperates in

northeast Russia what is

known in the industry as the

BUSINESS NEWS

world’s most remote mine.

Measures taken there include

setting up medical isolation

units and asking employees to

gather only in smaller groups,

with the result that the com-

pany has extended the hours

that its cafeteria operates, a

spokesman said. While the

mine’s workforce typically op-

erates in shifts of several

weeks on and several weeks

off, these shifts are now being

extended to limit the number

of people traveling in and out.

Mines are used to dealing

with medical emergencies,

given the often dangerous na-

ture of their business, and will

have medical facilities and

evacuation plans already in

place. In recent years, for in-

stance, some miners in West

Africa have stocked equipment

like hazmat suits and devel-

oped isolation wards to cope

with any potential outbreaks of

the Ebola virus.

If miners do curtail produc-

tion, this should support the

price of commodities, said Mr.

Allsop of UBS. The price of coal

held up as other commodities

fell at the height of the out-

break in China, as the country’s

coal mines had closed down.

Much will depend on what

measures countries put in

place to cope with the virus.

If Chile, for instance, imposes

strict quarantines as neighbor-

ing Peru has done, then that

would affect 40% of the world’s

copper supply, Mr. Allsop said.

Edward Sterck, an analyst at

BMO, said that while compa-

nies will likely curtail mine

production somewhat, he

doesn’t expect the cutback to

last too long. He notes that the

rebounds in production in

other recent periods of sharp

price falls, such as in 2016 and

2009, were swift.

Four of the world’s largest
miners said they are closing
production or slowing project
construction, as fallout from
the coronavirus pandemic
reaches beyond the sector’s
share prices to some of its
most isolated mines.
As with other sectors, inves-
tors have dumped mining
shares amid expectations the
pandemic will substantially di-
minish global growth and de-
mand for resources. But the
mining industry is unique in
that its main assets and people
are typically in very remote ar-
eas, presenting the sector with
challenges.
Anglo AmericanPLC and
America’s two largest miners,
NewmontCorp. andFreeport-
McMoRanInc., said on Mon-
day they were suspending proj-
ects or stopping some mining
in Peru after the country an-
nounced a national quarantine
to curb coronavirus’s spread.
Brazil’sValeSA said late
Monday it will close a nickel
mine in a secluded part of
northwest Canada for four
weeks, in order to prevent
workers it flies in from poten-
tially spreading the virus into
local communities.
Rio TintoPLC andLundin
Mining Corp. have also re-
stricted new projects, and min-
ers world-wide are curbing
travel, asking workers to take
stringent tests before they
travel to far-flung mines and
preparing medical isolation
units at such sites.
“This is the new dynamic,
miners closing down produc-
tion as coronavirus spreads,”
said Myles Allsop, a mining an-
alyst at UBS.
Factories and businesses are
closing around the world as
Covid-19 continues its spread
from China. Fiat Chrysler Auto-
mobiles NV and Peugeot maker
PSA Group are stopping almost

BYALISTAIRMACDONALD

Mining Companies Restrict Operations

Some stop production

or cut projects amid

fallout from pandemic;

stocks are hit hard

Anglo American shares are down 40% this year with demand seen as likely to fall. A company-owned iron-ore mine in South Africa.

WALDO SWIEGERS/BLOOMBERG NEWS

41%

Stock-pricedeclinefor

Glencorethisyear

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