ii view: Anglo American output beats City hopes

Third-quarter production update to 30 September

• Copper production up 1% from a year ago to 184 kilo tonnes (kt)
• Iron ore output down 9% to 14.3 million tonnes (mt)

Chief executive Duncan Wanblad said:

"We've delivered another solid quarter in Copper and Iron Ore, tracking to our plans and we are well positioned to meet 2025 guidance.

"Looking ahead, and building on the substantial value we have already unlocked through our own portfolio transformation, our agreement to merge with Teck represents our next major strategic step to accelerate value accretive growth, with the combined company forming a global critical minerals champion offering more than 70% copper exposure."

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ii round-up:

Anglo American (LSE:AAL) today detailed third-quarter production of copper and iron ore marginally exceeding City forecasts, with the miner raising full-year 2025 iron ore output hopes but lowering them for copper extraction in 2026. 

Copper production for the three months to late September rose 1% from a year ago to 184 kilo tonnes (kt). Iron ore output fell 9% to 14.3 million tonnes (mt). Anglo, which has been simplifying its commodity portfolio following the successful spurring of a BHP Group Ltd (LSE:BHP) takeover, is now in the process of merging with Canadian headquartered diversified miner Teck Resources Ltd Class B (Sub Voting) (NYSE:TECK). 

Shares in the FTSE 100 company rose 1.5% in UK trading having come into this latest news up by a fifth so far in 2025. That’s just ahead of a near 17% gain for the FTSE 100 index. Precious metals miners Fresnillo (LSE:FRES) and Endeavour Mining (LSE:EDV) have more than doubled year-to-date.

Driven by the group’s Minas-Rio operation in Brazil, Anglo now expects full-year iron ore output of 58-62 mt, up from a previous 57-61mt.

Management continues to expect annual copper output of 690-750kt, although with 2026 production at its Collahuasi mine in Chile now expected to be similar to 2025 given the continued early year processing of lower-grade materials from stockpiles.

Manganese ore production soared 140% for the period to 972,800 tonnes, fuelled by a return to full operations and previously impaired by cyclone related suspensions. 

Steelmaking coal production halved year-over-year to 1.9 million tonnes, hit by a previous incident at its Australian Moranbah North mine. 

Rough diamond extraction climbed 38% to 7.7 million carats, with nickel output up 2% to 10,100 tonnes. 

Further portfolio simplification came during the period with the sale of its 19.9% interest in Valterra Platinum, raising cash proceeds of $2.5 billion. 

The sale of its interests in nickel and the separation of diamonds, via De Beers, continues to progress. 

ii view:

Founded in 1917, Anglo today employs over 55,000 people. The miner previously announced a push to become a responsible producer of copper, premium iron ore and crop nutrients, items essential to decarbonise the global economy and improve both living standards and food security. 

For investors, the current drive to transform and enhance shareholder value will see the diversity of commodities provided reduced. An estimated price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap. Factors outside of management’s control such as the weather can hinder production, while Anglo’s forecast dividend yield of under 1% is less than rivals Rio Tinto Ordinary Shares (LSE:RIO) and BHP, each at over 4%.

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More favourably, the agreed merger with Teck to form AngloTeck is expected to generate an average annual uplift in adjusted profits (EBITDA) of $1.4 billion. Geographical diversity in terms of customer sales warrants consideration. A focus on improving productivity persists, while exposure to food security component and fertiliser ingredient potash adds an agricultural and growing global population dimension. 

For now, a sizeable re-rating over the last year may now leave Anglo shares up with events. That said, continued exposure to copper and iron ore, used widely by global industry, and an ongoing merger with Teck, could convince shareholders to stick around for the long term.  

Positives: 

• Emphasis on shareholder value
• Focus on costs

Negatives:

• Uncertain economic outlook
• Subject to currency movements

The average rating of stock market analysts:

Strong hold