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Anglo American's iron ore output inches up YOY in Q2, diamond production down 19%

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Anglo American's iron ore output inches up YOY in Q2, diamond production down 19%

Anglo AmericanPlc's production in the second quarter saw mixed results year overyear, but the company said July 20 that it was in line with the equivalentperiod of 2015 on a copper equivalent basis.

The company's year-over-year iron ore production from theMinas Riooperations jumped 91% to 3.5 million tonnes on a wet basis as it continued toramp up.

Iron ore output from KumbaIron Ore Ltd., however, decreased 15% to 8.9 million tonnes as theSishen minetransitioned the operations to a lower cost pit configuration.

Nickel production during the quarter was up 76% to 11,100tonnes following the successful completion of the furnace rebuilds in2015.

Output of platinum metal in concentrate improved just 1% to585,700 ounces, and refined platinum production increased by 33% to 747,600ounces, after the recovery at the precious metals refinery.

Export metallurgical coal production increased 4% to 5.5million tonnes due to first longwall production at in May and a longwallmove at Grasstree in the prior year.

Production of export thermal coal, on the other hand,decreased 6% to 8.1 million tonnes due to ramping down production at Drayton,where mining is scheduled to finish in late this year, and planned productioncuts at Cerrejon, partly offset by higher production at mostSouth African Export operations.

Anglo's diamond production dropped 19% to 6.4 million carats,as a result of the decision to reduce production as a response to the depressedmarket.

Copper production from the retained operations was down 8%to 144,200 tonnes as lower grades and significant snowfall impacted operationsat Los Bronces,which was partly offset by plant stability improvements at .

Output of niobium decreased 25% to 1,200 tonnes due to aplanned stoppage in May to implement a downstream metallurgy project.

For phosphates, production of both concentrate andphosphoric acid was up 18% to 358,000 tonnes and 73,600 tonnes, respectively,while fertilizer and dicalcium phosphate output improved 4% and 7% to 285,900tonnes and 41,500 tonnes.

Production for manganese ore decreased 2% to 791,000 tonnes,and fell 45% for manganese alloy to 30,000 tonnes, after restructuring of SouthAfrican manganese operations.

Anglo revised down its full-year output guidance for copperdue to the severe winter weather experienced at Los Bronces during the quarter.The company now expects to produce 570,000 tonnes to 600,000 tonnes for boththis year and 2017, compared to the previous guidance of 600,000 tonnes to630,000 tonnes for this year and 590,000 tonnes to 620,000 tonnes in 2017.

Due to the pit constraint, full-year production guidance forMinas Rio was also revised to 15 million tonnes to 17 million tonnes, from 15million tonnes to 18 million tonnes, previously.

Anglo reiterated its production guidance for diamonds,platinum, nickel, the Kumba iron ore, and export metallurgical and thermal coal.

The company's exploration and evaluation expenditure for thequarter dropped 35% year over year to US$45 million, including US$24 millionspent on exploration, and US$22 million on evaluation.

In the first half, Anglo's Minas Rio iron ore productionsoared 128% to 6.8 million tonnes, and nickel jumped 72% to 22,300 tonnes. Thesix-month output fell 21% to 17.8 million tonnes of iron ore from the Kumbaoperations, 15% for diamonds to 13.3 million carats, and 9% for export thermalcoal to 15.7 million tonnes.

Bernstein Research analysts said they maintained their"outperform" rating for the company as its asset "portfolio issimply not being reflected in Anglo's price."

The analysts said the results were "slightlydisappointing" for iron ore and copper, but were positive for platinumgroup metals, nickel, and diamonds.

Bernstein added that "the sense of a turnaroundstrategy under a reinvigorated management team is palpable," but Anglo'sinefficiency at its platinum operations, combined with the pressure from SouthAfrican labor inflation and increased "union militancy" posesdownside risk for the company.