KUMBA IRON ORE OUTPUT UP
Lower prices will see Anglo cut diamond production
LONDON – Global mining company Anglo American said it planned to cut diamond production this year in response to lower prices, signalling reduced confidence in a prompt rebound.
Anglo also said its iron ore output rose in the first three months of 2015 thanks to improved productivity.
However, copper production fell because of limited water supplies at its Chilean operations.
The London-listed company, which has lagged rivals for much of the past decade, is trying to improve its mining operations and is selling less profitable assets.
Its turnaround efforts though have so far been overshadowed by a rout in prices of metals such as iron ore and copper, which make up almost half and about a quarter of its earnings respectively.
Some respite came last year from higher margins at its diamond subsidiary De Beers, which became the second-largest earner for the company after iron ore.
But diamond demand has slowed since late 2014 as middlemen who buy rough stones struggle with a stronger dollar and liquidity problems.
De Beers has said it would produce sufficient quantities to match demand.
Yesterday, Anglo reduced its 2015 diamond production forecast to 30 to 32 million carats from 32 to 34 million carats, “in light of current trading conditions ”.
Nomura analysts forecast each 1 million carat cut in diamond production implies a 1.5% drop in Anglo ’ s 2015 earnings per share.
Iron ore output from Anglo ’ s Kumba division rose 7% in the first quarter from the same period a year ago to 12.2 million, thanks to some operational improvements at its South African assets.
However, copper output fell 15% to 171 800 tons due to water supply problems which prompted the company to temporarily shut a processing plant in Chile.
Platinum, a troublesome division for Anglo, hit by recurrent labour strikes and stubbornly weak prices, saw output rise by 50% in the first quarter to 536 000 ounces.
Last year ’ s production was heavily affected by industrial action.
The company is trying to divest its most labour-intensive platinum mines in South Africa and boost production at its newer Mogalakwena mine.
“We continue to support Anglo ’ s attempts to dispose of Rustenburg and Union,” Citi analysts said in a note.
“Even though we doubt whether it will be able to sell or list these assets, it is by far the best decision management can make to improve long-term economic value accretion for shareholders.” –