Anglo to cut production guidance across suite of minerals – report

ANGLO American is expected to cut production guidance for iron…

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ANGLO American is expected to cut production guidance for iron ore, copper, metallurgical coal and diamonds when it presents an investor update on Friday.

There are also questions over production at Anglo American Platinum (Amplats) next year amid speculation parent Anglo has discussed job cuts with the South African government. According to a Reuters report today Amplats could shelve the expansion of its Mogalakwena mine and put shafts at its Amandelbult section on care and maintenance.

“The three year volume outlook is likely to imply cuts to previous guidance (excluding 2026 which will be ‘new’), notably in copper, met-coal, diamonds and iron ore, reflecting a combination of operational challenges and poor market conditions,” according to a report by investment bank Morgan Stanley dated December 4.

The bank said that “persisent logistics challenges” in South Africa would lead to adjustments in producton at Kumba Iron Ore for 2024 “and beyond”. The bank forecast flat volumes at 37 million tons (Mt) a year through to 2025 for Kumba, increasing to 40Mt “as we expect some progress by then as a result of liberalisation of rail logistics”.

Anglo acknowledged in November it was under pressure following sustained weakening in platinum group metal prices (PGMs) and a decline in the performance of South Africa’s logistics infrastructure. But it declined to confirm a Bloomberg News article that job cuts had been discussed with the government.

“It is no secret that the current operating environment is very tough for both macro and South Africa-specific reasons and we are playing a major role in working across business and with government to help resolve some of those South Africa constraints,” Anglo American told the newswire.

“Beyond that, it would be inappropriate for us to comment on the details of our discussions,” it told the newswire.

Kumba’s third quarter iron ore sales fell 12% year-on-year to 8.9Mt owing to “multiple equipment breakdowns” at the Transnet-managed Saldanha Port. As a result, Kumba reported a near doubling in total stocks of iron ore year-on-year at some nine million tons (2022: 4.6Mt).

While Amplats maintained 2023 production guidance of 3.6 to four million oz, signs of stress were evident. It a third quarter update it said it was struggling to contain costs which would be at the upper end of its R16,800 to R17,800 per PGM oz estimate for the 12 months.

Reuters said Anglo had initially targeted saving $500m by cutting corporate jobs and some costs at head offices in Johannesburg, London and other locations.

Scaling down on spending could save an additional $1bn by end of 2024, with most expected from its platinum operations, the newswire said citing sources.

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