LONDON-Anglo American PLC (AAL.LN) cut its full-year diamond output guidance Thursday due to weaker market conditions but reaffirmed its volume guidance for all other commodities after reporting mixed output performance during the first quarter.
The world’s fifth largest diversified miner by market capitalization has been restructuring its business in order to turnaround its share price performance, which has broadly under performed peers such as BHP Billiton Ltd (BHP), Rio Tinto PLC (RIO) and Glencore PLC (GLEN) over the past five years.
The company has slashed costs, boosted mining performance and sold unwanted assets in an effort to turn around its fortunes but tumbling commodity prices, particularly in iron ore, copper and coal, three key earnings drivers for the company, has eclipsed those efforts.
Strong margins at its De Beers diamond unit has helped ease some of the pain. The division trumped iron ore to become the company’s largest earnings driver last year, accounting for 42% of underlying net profit. It produced 7,7 million diamond carats in the first quarter of this year, up 7% compared with the same quarter a year earlier due to higher grades at its South African Venetia mine. However, the company cut this year’s full-year diamond output guidance to between 30 million and 32 million carats from a range of 32 million to 34 million carats previously, citing tough diamond market conditions.
Consolidated iron ore production, Anglo’s second largest earnings driver last year, rose 19% to 13,4 million tons in the first quarter. Its Brazilian Minas Rio mine, which shipped 13 vessels-worth of iron ore since it began commercial production in October, produced 1,2 million tons of the steel making ingredient in the first quarter.
Meanwhile copper output, the company’s third largest driver of earnings, fell 15% to 171,800 tons, as expected, after the company took a small processing plant at its Chilean Los Bronces mine offline for 51 days to manage water reserve levels.
Anglo’s consolidated coal output was broadly flat at 24 million tons, although export metallurgical coal output fell 17% due to cyclone weather in Australia and the closure of its Peace River Coal operations in Canada. This was more than offset by higher thermal coal production, particularly in South Africa.
Nickel output fell 27% to 6,700 tons in the first quarter due to a blast furnace rebuild at its Brazilian Barro Alto operations while refined platinum equivalent ounces rose 50% to 536,000oz after taking into account lost output in the same quarter a year before due to strike action in South Africa.
At 0836 GMT, Anglo American’s shares were down 1,1% at 1,003 pence a share while the FTSE 350 mining index was down 1.2%. – MarketWatch