Anglo American Regulatory News (AAL)

Anglo American plc

Production Report for the third quarter ended 30 September 2019

Mark Cutifani, Chief Executive of Anglo American, said: "Production is up 4%(1) for the quarter, driven by the continued successful ramp-up at Minas-Rio and strong performance at Metallurgical Coal. De Beers production is lower, as expected, with Victor mine now at the end of its life and the transition of Venetia to underground. We remain broadly on track to deliver within our full year production targets, with an increase in production guidance at Minas-Rio. We expect to deliver to our production guidance for Copper and Thermal Coal, albeit at the lower end of their ranges; with Copper working to mitigate the effect of drought conditions in central Chile."

Production summary

• De Beers' diamond production decreased by 14% to 7.4 million carats due to planned mine closures and the underground transition at Venetia, and as we continue to produce to weaker market demand due to macro-economic uncertainty as well as continued midstream weakness.

• Copper production decreased by 8% to 158,900 tonnes due to unprecedented drought conditions impacting Los Bronces in Chile.

• Platinum and palladium production were broadly unchanged at 526,800 ounces and 351,800 ounces respectively.

• Kumba's iron ore production was unchanged at 10.5 million tonnes as increased production at Sishen was offset by lower production at Kolomela due to a plant upgrade.

• Minas-Rio's strong operational performance continued as iron ore production reached 6.1 million tonnes.

• Metallurgical coal production increased by 22% to 6.6 million tonnes due to improved wash plant throughput and equipment efficiency, as well as timing of longwall moves.

(1) Copper equivalent production is normalised to reflect closure of Voorspoed (De Beers) and Sibanye-Stillwater Rustenburg material that has transitioned to a tolling arrangement (Platinum Group Metals). Excluding the impact of Minas-Rio, Group copper equivalent production is down 2% in the quarter.

(2) Normalised for the transition of Sibanye-Stillwater Rustenburg material from purchased concentrate to a tolling arrangement.

(3) De Beers production is on a 100% basis, except for the Gahcho Kué joint venture which is on an attributable 51% basis.

(4) Contained metal basis. Reflects copper production from the Copper business unit only (excludes copper production from the Platinum Group Metals business unit).

(5) Produced ounces of metal in concentrate. Reflects own mine production and purchases.

(6) Wet basis.

(7) Reflects export production from South Africa and attributable export production (33.3%) from Colombia.

(8) Reflects nickel production from the Nickel business unit only (excludes nickel production from the Platinum Group Metals business unit).

http://www.rns-pdf.londonstockexchange.com/rns/6203Q_1-2019-10-21.pdf

DE BEERS

Rough diamond production decreased by 14% to 7.4 million carats due to planned reductions in South Africa and Canada. In addition, we continue to produce to weaker market demand due to macro-economic uncertainty as well as continued midstream weakness.

Botswana (Debswana) production was flat at 5.7 million carats. Orapa production increased by 22% due to a planned increase in the grade of material treated. This was offset by an 18% decrease at Jwaneng due to planned lower grade.

Namibia (Namdeb) production decreased by 7% to 0.4 million carats, as the Elizabeth Bay land operations were placed on care and maintenance in Q4 2018.

South Africa production decreased by 60% to 0.5 million carats due to lower mined volumes at Venetia as it approaches the transition from open pit to underground. In addition, Voorspoed production ended in Q4 2018 when it was placed on care and maintenance in preparation for closure.

Canada production decreased by 34% to 0.8 million carats primarily due to the closure of Victor which reached the end of its life in Q2 2019.

Rough diamond sales amounted to 7.4 million carats (7.1 million carats on a consolidated basis)(2) from three sales cycles, which compares to 5.0 million carats of sales (4.6 million carats on a consolidated basis(2) from two sales cycles in Q3 2018. Rough sales volumes were therefore higher due to an additional sales cycle in the period compared with the previous year; however, overall demand for rough diamonds remains subdued as a result of challenges in the midstream with higher polished inventories and caution due to macro-economic uncertainty.

Full Year Guidance

Production guidance(1) is unchanged at ~31 million carats, subject to trading conditions.

(1) De Beers Group production is on a 100% basis, except for the Gahcho Kué joint venture which is on an attributable 51% basis.

(2) Consolidated sales volumes exclude De Beers Group's JV partners' 50% proportionate share of sales to entities outside De Beers Group from Diamond Trading Company Botswana and the Namibia Diamond Trading Company, which are included in total sales volume (100% basis).

(1) De Beers Group production is on a 100% basis, except for the Gahcho Kué joint venture which is on an attributable 51% basis.

(2) Orapa constitutes the Orapa Regime which includes Orapa, Letlhakane and Damtshaa.

(3) Consolidated sales volumes exclude De Beers Group's JV partners' 50% proportionate share of sales to entities outside De Beers Group from Diamond Trading Company Botswana and the Namibia Diamond Trading Company, which are included in total sales volume (100% basis). 

COPPER

(1) Copper production shown on a contained metal basis. Reflects copper production from the Copper business unit only (excludes copper production from the Platinum Group Metals business unit).

Copper production decreased by 8% to 158,900 tonnes, due to a reduction at Los Bronces driven by unprecedented drought conditions in central Chile, partially offset by strong plant performance at Collahuasi.

Production from Los Bronces decreased by 16%, to 80,400 tonnes, with a 15% reduction in plant throughput due to lower water availability, partly offset by planned higher grades (0.78% vs. 0.76%). To date, 2019 has been the driest year of the longest drought ever recorded in central Chile.

At Collahuasi, attributable production increased by 5% to 64,500 tonnes, with planned lower grades (1.14% vs 1.33%) offset by strong plant performance.

Full year guidance

Production guidance is tightened to 630,000-650,000 tonnes (previously 630,000-660,000 tonnes) due to the severe drought, which also remains a risk for 2020 production.

(1) Excludes copper production from the Platinum Group Metals business unit. Units shown are tonnes unless stated otherwise.

(2) Anglo American ownership interest of Los Bronces, El Soldado and the Chagres Smelter is 50.1%. Production is stated at 100% as Anglo American consolidates these operations.

(3) TCu = total copper.

(4) Anglo American's share of Collahuasi production is 44%.

(5) Total copper production includes Anglo American's 44% interest in Collahuasi.

(6) Relates to sales of copper not produced by Anglo American operations.

PLATINUM GROUP METALS (PGMs)

(1) Ounces refer to troy ounces.

(2) Excluding purchase of concentrate volumes now treated under tolling arrangement.

(3) Includes managed operations and 50% of joint venture production.

(4) Includes 50% of joint venture production, and the purchase of concentrate from associates (BRPM prior to its disposal) and third parties.

(5) Comparative periods include purchase of concentrate volumes now under tolling arrangement.

(6) Refined production excludes toll material but includes in comparative periods material now transitioned to tolling.

Metal in concentrate production

Platinum production decreased by 1% to 526,800 ounces while palladium production was flat at 351,800 ounces.

Own mined platinum production increased by 6% to 351,700 ounces and palladium production increased by 5% to 262,700 ounces due to the inclusion of 100% of Mototolo volumes following the acquisition of the remaining 50% of the asset in November 2018. Increased production from Mogalakwena due to higher throughput and grade was partially offset by decreased production at Amandelbult due to maintenance at the concentrators.

Purchase of platinum in concentrate decreased by 11% to 175,100 ounces and of palladium decreased by 12% to 89,000 ounces due to lower purchases from joint ventures, as Mototolo became 100% owned in November 2018.

Refined production and sales volumes

Refined platinum production(1) increased by 4% to 578,600 ounces and refined palladium production(1) increased by 13% to 362,100 ounces. Q3 2018 volumes were negatively impacted by Mortimer smelter ramping up from its full rebuild and repairs at Polokwane smelter (35-day shutdown).

Platinum sales volumes(1) increased by 1% to 537,400 ounces and palladium sales volumes(1) decreased by 2% to 316,900. Sales volumes were lower than refined production due to maintenance work at the Waterval smelter.

Full Year Guidance

Production guidance (metal in concentrate) is unchanged at 2.0-2.1 million ounces of platinum and 1.3-1.4 million ounces of palladium.

(1) Does not include tolled volumes.

(1) Ounces refer to troy ounces.

(2) The joint venture operations are Modikwa and Kroondal. Platinum owns 50% of these operations, which is presented under 'Own mined' production, and purchases the remaining 50% of production, which is presented under 'Purchase of concentrate'. Mototolo is 100% owned from 1 November 2018.

(3) Excluding purchase of concentrate volumes now treated under tolling arrangement.

(4) 33% interest in BRPM until its sale effective 11 December 2018.

(5) Comparative periods include purchase of concentrate volumes now under tolling arrangement.

(6) Refined production excludes tolled material.

(7) Sales from own mined and purchased concentrate, excludes refined metal purchased from third parties.

(8) Relates to sales of metal not produced by Anglo American operations.

(9) 4E: the grade measured as the combined content of: platinum, palladium, rhodium and gold, excludes tolled material.

IRON ORE

(1) Wet basis.

Kumba - Total production volumes were broadly flat at 10.5 million tonnes, with increased production at Sishen offset by lower volumes from Kolomela.

Sishen's production increased by 2% to 7.2 million tonnes compared to Q3 2018 when production was reduced to manage stock levels arising from rail constraints.

Kolomela's production decreased by 3% to 3.4 million tonnes, as planned, due to an infrastructure upgrade at the DMS plant, which is scheduled to reopen in the fourth quarter.

Total sales decreased by 3% to 10.2 million tonnes, driven by domestic sales declining by 36% to 0.5 million tonnes due to lower customer off-take, while export sales were broadly flat at 9.7 million tonnes. Total finished stock increased to 5.1 million tonnes from 4.5 million tonnes at Q2 2019, as a result of the scheduled refurbishment of a ship loader.

In the third quarter, the ratio of lump to fines in the Kumba product was 66:34.

Minas-Rio - Production of 6.1 million tonnes was driven by continued strong operational performance and stability due to higher grade ore from the Step 3 mine area and productivity initiatives. The construction of the scheduled tailings dam raise was completed in August and approval for the conversion of the installation licence to an operating licence is expected by year-end.

Full Year Guidance

Production guidance for Kumba is unchanged at 42-43 million tonnes.

Minas-Rio production guidance for 2019 is increased to 20-22 million tonnes (previously 19-21 million tonnes) based on continued strong performance.

COAL

(1) Anglo American's attributable share of production.

(2) Includes export primary production, secondary production sold into export markets and production sold domestically at export parity pricing.

(3) Anglo American's attributable share of Cerrejón production is 33.3%.

Metallurgical Coal - Export metallurgical coal production increased by 22% to 6.6 million tonnes due to improvements in wash plant throughput and equipment productivity as well as the timing of longwall moves, with a move at Moranbah in Q3 2018. No significant impact on production is expected from longwall moves in the fourth quarter.

In the third quarter, the ratio of hard coking coal production to PCI/semi-soft coking coal was 85:15.

Thermal Coal South Africa - Export thermal coal production decreased by 15% to 4.3 million tonnes, with planned decreases in production as certain sections near their end of life.

Thermal Coal Colombia - Attributable export thermal coal production from Cerrejón decreased by 23% to 2.1 million tonnes due to weather related impacts (dust management and rain) and weak market conditions.

Full Year Guidance

Production guidance for metallurgical coal is unchanged at 22-24 million tonnes.

Production guidance for export thermal coal is tightened to ~26 million tonnes (previously 26-28 million tonnes) due to lower than expected production from Cerrejón.

(1) Anglo American's attributable share of production.

(2) Includes export primary production, secondary production sold into export markets and production sold domestically at export parity pricing.

(3) Anglo American's attributable share of Cerrejón production is 33.3%.