Mark Cutifani
Photo by: Duane Daws
JOHANNESBURG (miningweekly.com) – Despite the headwinds faced by diversified miner Anglo American during the first half of the year, the group had delivered a “pleasing” performance at all its operations barring platinum.
Anglo American CEO Mark Cutifani on Friday said the group posted 3% higher underlying earnings of $1.3-billion for the six months ended June 30.
However, underlying operating profit fell 10% to $2.9-billion, owing to weaker commodity prices, input cost inflation and the impact of the five-month strike in the platinum sector.
The lower price environment, which saw a 23% decrease in achieved Australian export metallurgical coal prices, a 17% fall in achieved iron-ore prices at Kumba Iron Ore and a 3% decline in realised copper prices, had cut underlying operating profit by $1-billion.
The platinum strike had shaved $385-million from the underlying profit during the half-year under review.
This had “more than offset” currency gains and improved business performance, the company said on Friday.
Anglo American reported a 26% decline underlying operating profit to $1.2-billion from its iron-ore and manganese operations during the first half of the year on the back of lower iron-ore prices and higher costs.
The group’s Kumba Iron Ore operations delivered a 2% rise in sales to 22.5-million tonnes, while export sales volumes dipped marginally to 19.7-million tonnes during the half-year to June.
At Kumba’s Sishen iron-ore mine, the redesign of the pit and changes to core operating processes had led to a 5% hike to 17-million tonnes during the six months ended June 30, in line with the mining plan to ramp up production to 37-million tonnes by 2016.
The Kolomela mine continued to perform strongly at above production design capacity, producing 5.5-million tonnes during the interim period under review, and partially offset the current challenges at Sishen.
The company was also “on track” to ship first iron-ore from the Brazil-based Minas-Rio project by the end of this year, as 95% of the project had been completed by June and commissioning had kicked off.
Underlying operating profit from Samancor, in South Africa, decreased 15% to $99-million.
Meanwhile, total production of coal for the six-month period to June increased by 3% to 48.5-million tonnes, with record export metallurgical coal production of 10.9-million emerging during the period on the back of productivity improvements at both the opencut and underground operations.
However, lower realised export prices and a $23-million decrease in self-insurance recovery amounts had dragged the underlying operating profit of collective coal operations to $260-million – a 25% decrease on the first half of 2013.
Anglo American’s copper units recorded a half-year underlying operating profit of $760-million, 20% higher than the first half of 2013, owing to a 15% increase in sales volumes and lower unit costs of production.
The increase in sales volumes was driven by 12% higher output of 396 400 t during the six months ended June 30.
The diversified mining group’s diamond arm, De Beers, recorded a 34% hike in underlying operating profit to $765-million, as solid demand across key markets and favourable exchange rate trends resulted in strong revenue growth.
Strong performance by Debswana and De Beers’ South African operations had led to a 12% increase in diamond output to 16-million carats.
PLATINUM EXIT
Following a five-month strike at some of Anglo American’s platinum operations, the group’s platinum arm recorded an underlying operating loss of $1-million for the six months ended June, compared with an underlying operating profit of $187-million in the first half of 2013.
Although operating cost savings were implemented at the strike-affected operations, Anglo American Platinum had incurred costs of $400-million during the strike period.
The company reported a cash operating cost of about R18 000/oz during the first six months of the year, an increase from the cash costs of R17 053/oz achieved for the 2013 full year.
The Rustenburg, Amandelbult and Union operations lost 424 000 oz of equivalent refined production during the strike and a further 16 000 oz in the ramp-up period at June 30.
Output from Amandelbult fell 80% year-on-year, while the Rustenburg operations’ output was cut by 258 200 oz, or 88% year-on-year. Production from Union dropped 89%.
Anglo expected production to be impacted during the second half of the year as the group continued its ramp-up process, which was estimated to return to steady-state production in the fourth quarter of the year.
First-half production had also been hit by Anglo’s restructuring of its consolidated Rustenburg-Union mine.
However, the Mogalakwena and Unki mines showed year-on-year improvements in production, registering platinum output of 184 800 oz and 30 000 oz respectively.
Equivalent refined platinum production from associates and joint ventures, including Kroondal and Bokoni, increased 4% year-on-year to 370 700 oz.
“In platinum, we have already outlined plans to reposition the portfolio through the planned divestment of Rustenburg and Union mines,” Cutifani commented during a media conference call on Friday.
“We plan to divest a number of other assets at the appropriate time and to redeploy that capital to support our drive for higher returns.”
The divestments and improved business performance were expected to support a long-term net debt target of $10-billion to $12-billion.
Anglo American declared an interim dividend of 32c for the six months under review.