Johannesburg. – Anglo American’s [JSE:AGL] copper mines, which should have compensated for the downturn in the platinum division, struggled with operational problems leading to disappointing production at both its well-publicised mines in Chile, Los Bronces and Collahuasi.
On Friday it was announced that the international resources group had suffered a 46% decline in earnings for the six months to end-June.
Los Bronces, which completed the doubling of its production capacity at the end of last year, produced at only 92% capacity and at Collahuasi extreme weather conditions, a lower grade of ore and a crack in its mill eroded production.
Copper production rose 14%, but that was simply owing to expansion at Los Bronces.
Analysts had expected a significantly higher increase in production.
The group’s metallurgical coal division raised its production by 40% to 8.6m tonnes, a record level, but lower prices for this sought-after coal product resulted in the $159m operating profit for it being 68% less than in the first half of 2011.
Queensland in Australia, where this coal is mined, suffered severe floods in the first half of 2011, which interrupted production in the entire mining industry.
Earlier last week Anglo bought the Revuboè coalfield in Mozambique for $555m, where metallurgical coal will be mined.
The contribution of thermal coal to profits fell 17% to $433m, one of the smaller declines in the portfolio.
Operating profit from Anglo’s South African coal mines was however 26% down at $235m, owing to lower prices and above-inflation cost increases in labour, electricity and fuel.
Cerrojon, the Colombian coal unit, boosted production to a record level of 6.1m tonnes.
A minor bright spot was Kumba, which also boosted production of iron ore to a record level owing to the early completion of the Kolomela project. Kumba exported 20.7m tonnes of iron ore.
The falling resource prices impacted heavily on Kumba in the six months and its operating profit was 38% down at $3.7bn.
The average price of iron ore fell 21% to $135/tonne, thermal coal (for power stations) from $121/tonne to $99 and metallurgical coal from $124/tonne to $104.
At the new Barro Alto nickel mine in Brazil the nickel division raised production by 80% to 22 900 tonnes, but the nickel unit’s operating profit was still 38% less than in the first half of last year because of low nickel prices.
The highlight of the interim results announced by chief executive Cynthia Carroll on Friday was that most divisions had recorded higher production figures.
Carroll is however so confident that the prices of resources will recover that the interim dividend was raised by 14% to US32¢.
“The threat to the mining industry in the longer term is not low prices – it's problems of supply as well as the challenges facing producers in getting new supplies to the market,” she said in response to questions.
The $1.38 earnings per share proved a disappointment. An earlier survey conducted by Bloomberg among analysts reflected a consensus of $1.57/share.
Carroll emphasised that Anglo had no plans to exit the platinum industry, despite the intensive review of Anglo American Platinum. “It's a complex industry, but for us it's a key sector, one that differentiates us from our competitors.”
In South Africa the divided will be R2.6889/share.
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