- Planned slowdown weighs on production
- Deteriorating copper grades at Los Bronces
Anglo American (AAL) has seen its market valuation halve over the past 12 months, but group chief executive Duncan Wanblad has said that the embattled miner will not be selling off any assets in the face of increasing investor pressure.
The group’s fourth-quarter (Q4) production update would have done little to appease dissatisfied shareholders, with Q4 volumes down by 7 per cent due to the ongoing slowdown in South Africa and deteriorating ore grades in its Los Bronces copper operations in Chile.
Iron ore production totalled 13.8mn tonnes in the final quarter, down 12 per cent on the same period in 2022. The group’s iron ore output has had to be trimmed to take account of South Africa’s creaking rail and port infrastructure. Anglo American has the flexibility to ramp-up iron ore volumes if capacity shortfalls in the nation’s Transnet rail network are overcome. But equipment shortages and maintenance backlogs persist despite the provision of a massive loan guarantee facility from South Africa’s government. Unfortunately, years of under-investment cannot be alleviated overnight, a reality also apparent in the nation’s state-owned electricity power network where “load-shedding” has become the norm.
Production also fell across several other mining commodities in Q4, including manganese and platinum, while increased copper production from the Quellaveco operations in Peru was not enough to compensate for lower grades and harder copper ore at Los Bronces. Meanwhile, diamond output declined by 3 per cent to 7.94mn carats. The De Beers business has been loss-making through the second half of 2023 owing to “subdued sight sale results reflecting conditions at cyclical lows”.
Wanblad said that the “deliberate prioritisation of value over volume is designed to improve margins and returns”. That translates into lower working capital commitments and the job losses that they will entail, particularly in its platinum group metals businesses. Unfortunately, it's clear that some of the problems facing the group are beyond management's control.
Last IC View: Buy, 1,797p, 14 Dec 2023
