First-quarter production at Anglo American PLC (LON:AAL) was down 6% on this time last year but the De Beers owner said it was “on track” to deliver its full year targets.
Production of diamonds, platinum, palladium, coal and manganese was all lower, though copper and iron ore production increased, as did nickel.
Roughly 80% of the reduction, however, was due to two planned longwall moves in the metallurgical coal business, compared to one in the same period a year ago.
Production issues at De Beers’ Venetia mine, the Kumba iron ore mine and in platinum group metals were “isolated”, said chief executive Mark Cutifani, making up the balance of the quarterly decline.
He said he ramp-up at Minas-Rio in Brazil was “ahead of plan” following the restart of operations in December, though investors and analysts remain concerned about the mine receiving its required tailings permit. Anglo has warned that if it does not get the permit by the end of 2019, it will have to shut the mine down, which some analysts reckon will result in a 20% reduction in group underlying earnings.
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Cutifani added: “By the end of the quarter we had increased our production run-rate, are on track to deliver this year's production targets and our guidance is unchanged."
For the full year, Minas-Rio is expected make an increased 18-20mln tonnes and got off to a good start, with production up 61%, helped by access to higher grade ore as it expands into new area. The Kumba iron ore mine is guided to produce 43-44Mt over the year, but for the first quarter output was down 12% to 9.5Mt.
Production levels mixed
Diamond production is expected to be hit 31-33m carats in 2019, subject to trading conditions, despite an 8% first-quarter decrease to 7.9mct as the Venetia mine transitions from open pit to underground.
The annual copper production target is 630,000-660,000 tonnes, helped by a quarterly increase of 4% to 161,100 tonnes due to strong performance from all mines.
Platinum production fell 5% in the quarter to 471,900oz as it heads towards a reduced full year target of 2.0-2.1m ounces, while palladium was down 6% 326,600 on its way to the full year 1.3-1.4Moz.
Metallurgical coal production fell 25% to 4.2Mt, leaving plenty to do to make the full-year 22-24Mt target, while thermal coal export production decreased 2% to 6.6Mt as it aims to hit 26-28Mt. Nickel is expected to be 42-44kt for the year and started well, up 14% to 9.8kt.
In a note to clients, analysts at RBC Capital said: “Although the shortfalls from Q1 are expected to be recovered, the weaker overall production is likely to be read as a negative overall.”
However, they added: “Anglo American remains our only Outperform diversified miner in London. At 0.83x NAV and 4.6x 2019 EV/EBITDA the shares continue to screen significantly more inexpensive than peers including RIO (7.9x EV/EBITDA) and BHP (7.0x EV/EBITDA).”
In afternoon trading, Anglo American shares remained just under 1% eaiser at to 2,060.50p.
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