Anglo American lowers coal guidance after weaker second quarter

Anglo American shares were in the red on Thursday morning, after it reported a fall in production for diamonds, platinum, palladium, Kumba iron ore, and metallurgical and thermal coal in its second quarter, and lowered its production guidance for coal for the year.

its Minas-Rio operation in Brazil continued its “strong” operational performance in the second quarter, with 6.2 million tonnes of high quality iron ore production, reflecting ongoing P101 productivity improvements.

The FTSE 100 mining giant said Collahuasi in Chile saw copper production increase 38% due to “strong” performance.

Metallurgical coal production decreased by 32%, however, to four million tonnes, due to two incidents underground at Moranbah and Grosvenor, as well as longwall moves at Grosvenor and Grasstree.

Covid-19 lockdowns across southern Africa affected De Beers, platinum group metals, Kumba and thermal coal, with lower refined platinum group metal production due to the repairs and ramp-up of the ACP.

Year-on-year, diamond production fell 54% to 3.5 million carats, while copper production was up 5% at 167,000 tonnes.

Platinum production fell 41% to 228,000 tonnes, with palladium production off 20% at 8.5 million tonnes.

Iron ore production at Kumba was down 20% to 8.5 million tonnes, while at Minas-Rio it grew 5% to 6.2 million tonnes.

Metallurgical coal production slid 32% to four million tonnes, with thermal coal production 34% lower at 4.4 million tonnes.

Nickel production in the second quarter was ahead 10% at 10,800 tonnes, while manganese ore production was down 4% at 796,000 tonnes.

Looking ahead, Anglo American said that following the temporary suspension of operations at Grosvenor since the start of May, production guidance for metallurgical coal was revised down to between 16 million and 18 million tonnes, from previously 19 million to 21 million tonnes, subject to the extent of further Covid-19 related disruption.

Production guidance for export thermal coal was revised to around 21 million tonnes from 22 million tonnes, due to the impact of Covid-19 related restrictions and lower production in response to demand at Cerrejón.

That also remained subject to the extent of further Covid-19 related disruption, Anglo American said.

Production guidance for De Beers remained unchanged at 25 million to 27 million carats on a 100% basis, while for copper it was also unchanged at 620,000 to 670,000 tonnes.

Platinum group metals guidance was also the same, at between 1.5 million and 1.7 million ounces of platinum and one million to 1.2 million ounces of palladium, subject to the extent of any further Covid-19 related disruptions.

For iron ore, Kumba production guidance was unchanged at between 37 million and 39 million tonnes, subject to the extent of further Covid-19 related disruption.

Minas-Rio production guidance was also unchanged at between 22 million and 24 million tonnes, with the planned one month production stoppage to carry out routine internal scanning of the pipeline, originally scheduled for the second quarter, postponed to the second half of the year due to Covid-19 related constraints.

Nickel production guidance was unchanged at between 42,000 and 44,000 tonnes.

Anglo American said its exploration and evaluation expenditure decreased 39% to $43m.

“Exploration expenditure decreased by 42% to $18m, driven by decreased activities across most products, in particular diamonds, due to Covid-19.

“Evaluation expenditure decreased by 36% to $25m, driven by decreased works in ,metallurgical coal and at Sakatti copper and platinum group metals.”

The company said that by the end of the quarter, there was around a $1.3bn build-up of working capital, largely due to Covid-19 impacts on demand for diamonds, ACP repairs affecting refining activity at platinum group metals, and late June weather impacts on vessel loading for both copper and Kumba.

At 1020 BST, shares in Anglo American were down 1.87% at 1,916.8p.