Johannesburg - Mining giant Anglo American’s share price jumped more than 3 percent on Tuesday after it said diamond production rose in the third quarter, as the industry continued to rebound.
Chief executive Mark Cutifani said: “Operational improvements continue across the portfolio, delivering a 4 percent production increase on a copper equivalent basis in the third quarter, and a 12 percent increase compared to second quarter 2016.”
Anglo American has said it was focusing on high value core commodities, including platinum group minerals, copper and diamonds.
The company maintained full-year forecasts for most of the commodities it produces.
Third-quarter output of the gems climbed 4 percent to 6.3 million carats from 6 million carats a year earlier, the London-based company said on Tuesday.
While the increased output reflected improved market conditions, Anglo remained cautious about the outlook, it said.
The century-old company is trying to engineer a turnaround after a slump in commodity prices sent its stock plummeting 75 percent last year. The producer plans to sell more than half its mines and wants to exit the iron ore and coal business to focus on its best assets - diamonds, platinum and copper.
It is the best performer in the FTSE 100 index so far this year, more than tripling in the period.
Diamond industry rebound
The diamond industry has rebounded this year after Anglo’s De Beers unit and Russian rival Alrosa PJSC cut supply last year. While rough-diamond prices gained 7.4 percent this year, De Beers’s management and other executives had cautioned that the final six months of 2016 could be more difficult. The company maintained its full-year goal of 26 million carats to 28 million carats.
“Results from Anglo American this morning were broadly positive, as the bulks posted strong performances,” Paul Gait, an analyst at Sanford C Bernstein, said in a note to investors.
Copper production from retained operations fell 9 percent to 139 800 tons after strikes at its Los Bronces mine in Chile. The company maintained its full-year output goal of 570 000 to 600 000 tons. Anglo’s platinum production rose 1 percent to 619 000 ounces, while nickel output surged 66 percent to 11 300 tons. The company trimmed it coking-coal target to 20.5 million tons to 21.5 million tons after selling its Foxleigh mine.
Anglo kept the prediction for platinum output at 2.3 million to 2.4 million ounces. The forecast for full-year nickel output was maintained, while the estimate for thermal-coal exports from South Africa and Colombia was kept at 28 million to 30 million tons.
Ashburton Investments fund manager Tom Cadle said the 4 percent increase in diamond output showed good management from Anglo.
“What the company managed to do well was cutting back on production when the commodity prices fell in 2015. They waited for the prices to recover so that they could increase production at a later stage. The 4 percent increase in diamonds is the result of that getting back to normal production as the prices recovered,” he said.
Anglo shares gained 2.27 percent to close the day at R186.09 on the JSE on Tuesday.
Business Report