Sunday, May 19, 2024
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Anglo American’s Strategic Shift: Copper Optimism, Diamond Adjustments

Anglo American (LON: AAL), the mining powerhouse, has expressed optimism concerning the copper market, reporting an impressive 11% surge in output during the first quarter. However, the company has made adjustments to its diamond production targets for 2024, citing persistently high inventory levels and a gradual market recovery as driving factors.

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The notable increase in copper production, totaling 198,000 tonnes, was primarily attributed to the exceptional performance of the Quellaveco mine in Peru, which achieved its peak throughput rate. In Chile, where Anglo American operates the majority of its copper ventures, production rose by 6%, driven by robust performances at the Collahuasi and El Soldado mines, effectively offsetting a weaker quarter at Los Bronces.

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Although the annual copper output target remains steady at 730,000-790,000 tonnes, operations in Chile, the world’s leading copper producer, are expected to be impacted by the temporary closure of the Los Bronces plant starting mid-year. Additionally, copper production in Peru is anticipated to be weighted toward the latter half of the year due to temporary declines in copper grades during the initial months, ranging between 0.6%-0.7%.

Conversely, Anglo’s diamond segment, notably represented by De Beers, experienced a 23% decline in output in the first quarter, reflecting cautious market conditions prompting production adjustments. Consequently, the company has revised its annual production forecast downward to 26 million-29 million carats, down from the previously projected 29 million to 32 million carats. This adjustment coincides with an anticipated rise in average costs per carat to $90, up from $80, following a $1.6 billion writedown in February.

The decline in diamond prices persists due to surplus inventory, exacerbated by the competitive presence of lab-grown diamonds in the market. Economic uncertainty further influences conservative purchasing behaviors, contributing to a sluggish recovery in rough diamond demand projected for the remainder of the year.

BMO analyst Alexander Pearce offered positive remarks on Anglo American’s initial performance in what is anticipated to be a challenging year for the company. However, the production of platinum-group metals experienced a 7% decline to 834,000 ounces, accompanied by a 30% drop in average realized prices, despite stable sales volumes.

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