Anglo American’s Q3: Copper Holds the Line Against Fall in Iron

- October 23rd, 2018

Anglo American reported a 1-percent increase in production across its diversified portfolio on a copper-equivalent basis on the proviso that a crash in Minas-Rio’s production be excluded.

Anglo American (LSE:AAL) says that it had a good quarter, with a 1-percent rise in total production on a copper-equivalent basis year-on-year — though only if a Minas-Rio stoppage is excluded.

The Minas-Rio iron ore project in Brazil has been sitting idle since March of this year due to the detection of two leaks in the slurry pipeline there, leading to iron ore production falling from 4.2 million tonnes in Q3 2017 to zero in Q3 2018 — taking Anglo American’s overall production on a copper-equivalent basis back into the red, down 3 percent year-on-year.

Besides the blemish of Minas-Rio (and a 1-million-tonne year-on-year decline from the Kumba iron ore asset in South Africa), all other commodities across the diversified miner’s portfolio are looking dandy, with copper standing out as a high achiever — up 17 percent in Q3 year-on-year and up 13 percent year-to-date on 2017.

The company’s three operating mines produced 172,000 tonnes of the red metal in the quarter, taking Anglo American’s 2018 year-to-date production to 485,000 tonnes.

This time last year copper production was at 431,000 tonnes.

While falling grades are an issue for many copper operations, across Anglo American’s Chilean mines higher-than-expected grades were the order of the quarter.

Los Bronces in Chile produced 95,800 tonnes (up 23 percent), “driven by strong mine and plant performance.” That performance was helped by lower-than-expected winter snowfall and higher grades, with copper grades at 0.76 percent vs. an expected 0.69 percent.

Collahuasi also in Chile produced 61,500 tonnes (up 5 percent), with higher grades again credited for the increase (1.33 percent vs. 1.24 percent planned). The smaller El Soldado mine was up as well, by an impressive 33 percent to 14,500 tonnes.

Overall, full-year guidance remains unchanged despite the higher grades, and currently sits at 630,000 to 660,000 tonnes.

During the quarter, Anglo American announced it would be proceeding with its Quellaveco property in Peru, a project that will dwarf its current copper operations with projected annual output of 300,000 tonnes when fully ramped up in 2023.

With a cool price tag of US$5 billion, the company had been eager to find a partner to shoulder the costs. In June news hit that Mitsubishi (TSE:8058) will be a 40-percent partner behind Anglo American’s decision to go ahead with the project.

Elsewhere in Anglo American’s vast portfolio, diamond production was down 5 percent to 8.7 million carats — though that was to be expected, according to the company, which says it came about due to lower grades and slowing production caused by a shutdown to upgrade its processing plant at Venetia in South Africa.

Platinum and palladium production were up, with platinum up 4 percent to 649,000 ounces and palladium up 1 percent to 411,000 ounces.

Metallurgical coal output was down 3 percent to 5.4 million tonnes, though it remains up 10 percent year-to-date over 2017 given Q2 was a bit of a bumper quarter for the commodity. It has been partially credited for a 6-percent overall increase in production across the company last quarter.

Mark Cutifani, CEO of Anglo American, credited copper for offsetting falls in diamond and iron ore production.

“Our focus on driving efficiency and productivity across the business resulted in another strong quarter, with volumes 1 percent higher than the solid operational performance seen in Q3 2017. Production per employee has increased by 5 percent in 2018, compared to 2017, as we maintain relentless discipline on controllable costs,” he said.

On the London Stock Exchange, Anglo American was trading down 2.41 percent on Tuesday (October 23) at GBX 1,622 by market close.

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

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