Anglo American (AAL LN) 2057.5 pence, Mkt Cap £26.61bn – Production report shows mixed results • Anglo American reports a mixed production performance for the quarter to 31st March with increased copper production offset by lower levels of metallurgical coal output resulting from two planned longwall moves compared to one in Q1 2018 and “isolated production issues” affecting the diamond, iron-ore and platinum operations. • Overall, the company says that “Production is 6% lower in the quarter … … Metallurgical Coal accounting for 80% of the reduction”. The company is, however, maintaining its metallurgical coal production guidance for 2019 at 22-24mt reflecting the planned nature of the lower output in the quarter. • Copper production was 4% higher than in Q1 2018 at 161,100 tonnes which the company describes as the “the best first quarter performance since 2014, with strong performance at all operations”. • Higher grades at the Los Bronces mine (0.8% copper compared to 0.71%) pushed output up by 8% to 91,700tonnes while higher grades at El Soldado (0.84% compared to 0.67%) increased output by 30% to 12,100 tonnes. Strong plant performance at Collahuasi offset by lower grades resulted in a 5% decline in attributable production to 57,300t. The company’s 2019 copper production guidance remains unchanged at 630-660,000tonnes. • Production of metallurgical coal fell by 25% to 4.2mt (Q1 2018 – 5.5mt) as a result of longwall moves at both the Moranbah and Grasstree mines while in Q1 2018 only Grasstree was affected. The company explains that an extended longwall move at Moranbah lasted 15 weeks “enabling additional maintenance to be completed that will shorten a second longwall move planned for the second half of 2019.” • Thermal coal exports from South Africa rose by 2% to 4.4mt while domestic coal production “decreased by 54% to 2.3 million tonnes mainly due to the completion of the sale of the Eskom-tied operations (New Vaal, New Denmark and Kriel) to Seriti on 1 March 2018.” • In Colombia, “Attributable export thermal coal production from Cerrejón decreased by 10% to 2.2 million tonnes due to dust management restrictions” • The 8% decline in diamond output to 7.9m carats are attributed to moves to change operations at the Venetia mine in South Africa from open-pit to underground operations with Venetia’s production declining by 65% to 382,000 carats (Q1 2018 – 1.09m carats) while production at the largest producer, Debswana, rose by 2% to 5.95m carats (Q1 2018 – 5.81m carats). • Namibian and Canadian diamond output declined by 9% (to 483,000 carats) and by 3% (to 1.04m carats (Q1 2018 – 1.07m carats) respectively. Diamond production guidance for the full year remains unchanged in the 31-33m carats range. • Platinum and palladium output declined by 5% (to 471,900oz) and by 6% (to 326,600oz) respectively reflecting the impact of “operational challenges … exacerbated by power disruptions.” Platinum and palladium production guidance is unchanged with the company expecting to produce between 2.0-2.1moz of platinum and 1.3-1.4moz of palladium. • Lower iron ore output at Sishen (down 12% to 6.4mt) as a result of “unscheduled plant maintenance” contributed to a 12% reduction in Kumba’s output, however, the restart of operations at Minas Rio during December and a smooth ramp up of production saw iron ore production increase by 61% to 4.9mt. Production guidance for the full year remains unchanged at 43-44mt for Kumba and 18-20mt for Minas Rio. • Anglo American reports a 19% increase (to US$69m) in its expenditure on exploration and evaluation. Exploration expenditure increased by 15% to $23m “driven by drilling activities at Sakatti (copper-nickel-PGMs) in Finland and increased work in our PGMs and Kumba Iron Ore businesses. Evaluation expenditure increased by 21% to $46 million driven by increased work on the Los Bronces Underground Project (Copper) in Chile.” Conclusion: Largely planned reductions in output during the quarter has left Anglo American’s production guidance intact across its spread of commodities. The restart of Minas Rio and the strong performance of the copper operations are both positive news as is the performance of Debswana.
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