Drought forces Anglo to cut back on copper production

ANGLO American, the JSE-listed global diversified company, has cut its copper production because of a severe drought in Chile.

The company, which announced its production numbers for the third quarter ended September yesterday, tightened the production guidance for copper to between 630 000 and 650 000 tons from a previous estimate of 630 000 and 660 000 tons due to the severe drought, which it said remained a risk for 2020 production.

Anglo said the unprecedented drought conditions in central Chile had resulted in an 8 percent drop in copper production, partially offset by strong plant performance at the Collahuasi mine also in that country.

“Production from Los Bronces decreased by 16 percent to 80 400 tons, with a 15 percent reduction in plant throughput due to lower water availability, partly offset by planned higher grades. To date, 2019 has been the driest year of the longest drought ever recorded in central Chile,” the company said.

Anglo – whose portfolio includes iron ore, platinum, coal and diamonds – warned that power utility Eskom’s prolonged load-shedding would likely impact the production guidance at Anglo American Platinum.

“The company is not expecting any significant headwinds in the final quarter, however, if there are any prolonged periods of Eskom load-shedding, full-year production guidance could be impacted,” it said.

The company maintained its platinum group metals (PGM) production for 2019 at between 4.2 million ounces and 4.5 million ounces, including platinum production of between 2 million ounces and 2.1 million ounces and palladium production guidance of between 1.3 million ounces and 1.4 million ounces.

In terms of iron ore, the company expects lower sales from Pretoria-based Kumba Iron Ore.

It said lower domestic sales volumes at Kumba had resulted in the reduction of the total sales guidance to between 42 million tons and 43 million tons from 43 million tons and 44 million tons.

Kumba’s total sales decreased by 3 percent to 10.2 million tons from 10.5 million tons a year earlier driven by domestic sales declining by 36 percent to 500 000 tons from 800 000 tons a year earlier due to lower off-take from ArcelorMittal South Africa, while export sales were flat at 9.7 million tons.

However, Kumba’s total production remained on track to meet the full-year guidance, the company said. In terms of rough diamonds, the outlook was unchanged at 31 million carats. Diamond production in the third quarter fell by 14 percent to 7.4 million carats due to planned reductions.

South Africa’s diamond production decreased 60 percent to 500 000 carats due to lower mined volumes at Venetia as it approached the transition from open pit to underground. In addition, Voorspoed production ended in the fourth quarter of 2018.

Anglo American shares closed 1.03 percent lower at R369.72 on the JSE yesterday