Anglo American Reports (Almost) Everything On the Up

Multi-national diversified miner Anglo American (LSE:AAL) has reported an overall increase in production of 6 percent on a copper equivalent basis year-on-year.

Anglo American CEO Mark Cutifani credited copper and coal with driving the company’s performance.

“Copper and metallurgical coal in particular (drove) a 6 percent increase in production,” he said.

“This reflects our consistent and relentless focus on driving efficiency and productivity from our existing world-class asset base,” he added.

Looking at the numbers behind the attractive news, copper guidance has remained the same at 630,000-660,000 tonnes with the red metal contributing in a big part to the company’s fortunes so far, up 12 percent year-on-year alone.

The Los Bronces and Collahuasi copper mines in Chile were reported to be up 14 and 7 percent respectively. Also in Chile, the smaller El Soldado mine was up 26 percent, but mainly due to a mine stoppage last year that depressed 2017’s numbers.

Los Bronces also enjoyed an increase in copper grade, from 0.7 percent to 0.76 percent, while Collahuasi could have had even higher production numbers year-on-year if it weren’t for planned maintenance that has since been completed.

The other resource credited by Cutifani, metallurgical coal, was up a whopping 33 percent, driven mainly by strong performance at Anglo American’s Australian operations at Moranbah and Grosvenor.

But overall, coal production was down by 21 percent across the company’s coal portfolio.

Thermal coal depressed the overall numbers for the energy resource, with thermal coal in Australia down 5 percent, and in South Africa by 45 percent.

While metallurgical coal guidance remained unchanged at 20-22 million tonnes, export thermal coal has been revised down a notch from 29-31 million tonnes to 28-30 million tonnes “due to dust-related stoppages at Cerrejón (Colombia) and challenging geology at sections of South African operations approaching end of life.”

Domestic thermal coal production also played a big role in the overall down results for coal, with the sale of thermal coal operations in South Africa behind a 66 percent fall in production.

Across the rest of the sprawling company, rough diamond production was also up 3 percent with 9 million carrots produced. Platinum, palladium, iron ore and manganese ore were also up, while nickel was down thanks to the Brazil trucker’s strike throttling plant supplies.

In iron, the company’s US$8 billion Minas-Rio iron ore mine in Brazil continues to be delayed, with production still suspended and ramp-up not expected until Q4 2018.

Closed due to pipeline spills earlier this year, the Minas-Rio mine is expected to produce 26.5 million tonnes of iron ore a year when fully ramped up in 2020.

“The detailed pipeline inspection work is on track. A 4 km section of the pipeline, where the leaks occurred, will be replaced as a precautionary measure and is expected to be completed in Q4 2018, followed by the restart of the operation, subject to required clearance from authorities. There is no change to the earnings impact of the pipeline incident from the guidance provided in April, with a 2018 loss of $300-$400 million in EBITDA.”

Iron ore production was therefore all the credit of Anglo American’s South African operations, with overall production there up 2 percent, and the Minas-Rio mine’s 64 percent fall in production deemed “immaterial”.

On the London Stock Exchange, Anglo America was trading at GBX1,622, a fall of 4.02 percent.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.