PGMs help Anglo recover sparkle lost in a weak diamond market
STRONG iron ore and platinum group metals (PGM) prices boosted Anglo American’s earnings during the year ended December 2019 and helped the company shrug off the impact of the weak diamond market.
The group said yesterday that the basket prices of commodities and products had contributed $400 million (R6 billion) to underlying earnings before interest, taxes, depreciation and amortisation (Ebitda) in 2019. Underlying Ebitda jumped 9 percent to $10bn from $9.1bn in 2018.
Mark Cutifani, chief executive of Anglo American, said the group continued to build on the fundamental structural and operational improvements it had embedded across its business. “We have also benefited from product and market diversification, with strong precious metals and iron ore prices offsetting weakness in diamonds and coal,” said Cutifani.
Anglo said that the average realised FOB iron ore price for Kumba Iron Ore surged by 35 percent, outperforming the market index owing to its higher iron content and the relatively high proportion of lump ore. Similarly, the (PGM) basket jumped by 27 percent, largely due to palladium and rhodium, which recorded increases of 48 and 73 percent respectively.
However, export thermal coal prices fell 30 percent, metallurgical coal was down 12 percent, and copper declined by 4 percent, partially offsetting the positive increases.
Anglo said that overall demand for rough diamonds was lower, owing to challenges in the midstream, as a result of closure of some US “bricks and mortar” retail outlets and an increase in online purchasing.
In addition, the company also recorded a 13 percent decline in De Beers’ rough diamond production. Diamond production fell to 30.8 million carats in 2019 from 35.3 million carats in 2018, primarily driven by a reduction in South Africa at its Venetia mine in Limpopo.
Copper production also slid by 5 percent to 638 000 tons from 668 300 tons, with higher planned grades at Los Bronces in Chile offset by production losses due to drought.
However, total platinum and palladium production increased by 1 percent to 2.05 million ounces and 1.38 million ounces, respectively.
The group proposed a dividend of $0.47 a share, bringing the total dividends paid in 2019 to $1.09 per share from $1 a share in 2018.
Net debt increased to $4.6bn due to investment in growth opportunities. Anglo completed the two-phased restructuring plan of the Atlatsa mine which entailed, among others, the acquisition of the exploration properties adjacent to Mogalakwena mine.
Last month the company acquired UK fertiliser developer Sirius Minerals.
“The project has the potential to fit well with our established strategy of focusing on world-class assets, particularly in the context of Anglo American’s portfolio trajectory towards later cycle products that support a fast-growing global population and a cleaner, greener, more sustainable world,” the company said.
Anglo American plc’s share price closed 2.49 percent higher at R414.79 on the JSE yesterday.