Anglo American targets growth in star copper unit
The globally diversified mining company’s production data came in largely as expected and within the guidance it provided
Anglo American has stepped up spending on assessing going underground at its Los Bronces copper mine in Chile as it continued to post solid annual operating results.
Anglo American and its listed subsidiaries, Anglo American Platinum and Kumba Iron Ore, released fourth-quarter and full-year production data for 2018 as well as received commodity prices, coming in largely as expected by the market and within guidance provided by the globally diversified mining company.
“While iron ore was a miss, all other divisions surprised to the upside, with the big beats being at the coal division [both thermal (SA) and met coal], diamonds and copper,” said Goldman Sachs analysts in a note.
Another analyst flagged concerns about the prices Anglo achieved for its copper, iron ore from Kumba and metallurgical coal from Australia.
“The lower realised pricing will likely temper some of the positives from the better production,” said RBC Capital Markets analyst Tyler Broda.
“However, our key takeaway remains the solid operating numbers that Anglo has been generating through 2018, which we would expect to continue into 2019 if our visit to the copper operations last November was any indication,” he said.
Anglo CEO Mark Cutifani described the fourth quarter as strong.
“Solid operational performance resulted in a 23% increase in production from our copper business, more than offsetting the impact of infrastructure constraints at Kumba,” Cutifani said.
The standout performance was at its copper division, where full-year production increased 15% to 668,000 tons. Full-year guidance for 2019 was pegged at between 630,000 and 660,000 tons.
Anglo sold 671,000 tons of copper at an average price of $6,239/ton, which was lower than the London Metal Exchange price of $6,526/ton.
Anglo reported a sharp increase of 25% in exploration and evaluation spending for 2018 of $284m, with the bulk of that coming from the evaluation of building an underground mine at its Los Bronces copper mine.
In July 2018, Anglo triggered the construction of the $5.3bn Quellaveco copper mine in Peru to add 300,000 tons of copper a year from 2022.
It is the first major project under Cutifani’s leadership and one he is at pains to ensure is a success, unlike the $13bn purchase and construction of the Minas Rio iron ore mine in Brazil, which Yuen Low, an analyst at Shore Capital, has labelled a “white elephant”.
Diamond output from Anglo’s 85%-held De Beers increased 6% to 35.3-million carats in 2018.
Looking ahead, De Beers expects 2019’s output to be between 31-million and 33-million carats as the company moves production underground at its Venetia mine in SA in a $2bn project.
Full-year rough diamond sales fell 4% to 33.7-million carats, with an average realised price of $171/carat because of reduced sales of lower-value diamonds.
At Anglo American Platinum, the world’s largest source of mined platinum group metals (PGMs) and which is 80%-owned by Anglo, total output of platinum and palladium production increased 4% and 3%, respectively, compared to 2017.
Platinum production was 2.485-million ounces. Palladium was 1.6-million ounces.
At Kumba, production was 4% lower at 43.1-million tons as the company tweaked its production to match constrained rail capacity and loading facilities at Saldanha in the fourth quarter.
Production restarted at Minas Rio after being stopped for most of the year because of leaks in a 529km-long slurry pipeline linking the mine to a port. It generated 3.4-million tons, which was 80% lower than the previous year.
Anglo has said the closure will knock $320m off its full-year earnings.
Minas Rio is expected to produce between 18-million and 20-million tons in 2019 at a cost of between $28/ton and $31/ton.