ii view: Anglo American production fails to shine

Shares for this FTSE 100 miner are down by more than a fifth year-to-date. We assess prospects. 

First-quarter production update to 31 March

Chief executive Duncan Wanblad said:

"We continue to make progress towards our suite of sustainability ambitions and organic growth options in future enabling products.

ii round-up:

Diversified miner Anglo American (LSE:AAL) today detailed marginally disappointing production numbers but kept its full-year expectations unchanged as it remained optimistic regarding operational improvement. 

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Production for its biggest profit generator Platinum Group Metals fell 13% to 626,000 ounces, partly due to unplanned maintenance issues, missing City hopes of over 700,000 ounces. 

Shares for the FTSE 100 company fell more than 2% in UK trading having come into this latest announcement down by just over a fifth year-to-date. That’s similar to Mexican silver miner Fresnillo (LSE:FRES), while shares for rival diversified miner Rio Tinto Registered Shares (LSE:RIO) are down by around 13% in 2023.

Copper production for Anglo, although up 28% year-over-year to 178,100 tonnes and aided by the ramp-up of production from its new Quellaveco mine in Peru, missed analyst forecasts nearer to 190,000. That came as production in Chile fell 15% to 118,600 tonnes as it remained hindered by the region’s drought conditions. Water is an essential requirement in the production of copper. 

Iron ore production rose 15% from the same quarter in 2022 to 15.1 million tonnes, beating forecasts and helped by increased equipment reliability and reduced rainfall. 

Realised prices for its array of commodities mined broadly fell year-over-year, hindered by rising interest rates to quell runaway inflation and slowing global economic growth and demand.   

Anglo’s second-quarter production update is scheduled for 20 July, followed on the 27 July by interim results. 

ii view:

Started in 1917, Anglo today employs over 100,000 people across operations ranging from Brazil, South Africa, Chile to Peru, Colombia, Botswana, Namibia, and Australia. Platinum Group Metals including Palladium and Rhodium generate its biggest slug of sales, followed by iron ore, then its exposure to diamond miner De Beers.  

For investors, concerns regarding the health of the global economy going forward and its appetite for commodities cannot be dismissed. Costs generally for businesses remain elevated, Western geopolitical tensions with major customer China have heightened, the weather can impact performance, while the dividend was previously reduced given high economic outlook uncertainty. 

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On the upside, its diversity of commodities contrasts with the more focused portfolios at rivals such as Antofagasta (LSE:ANTO). Full-year 2023 production estimates were left unchanged given management’s expectation for reduced events such as maintenance, its health and safety record has in more recent year’s been high on management’s agenda, while a push towards climate change friendly products and away from less so considered items has been followed. 

For now, and while caution in regarding the economic outlook is sensible, an estimated future dividend yield of over 5% is likely to keep existing investors staying patient. 

Positives: 

• A diversity of commodity products 
• Expanding copper production 

Negatives:

• Uncertain economic outlook
• Operations are subject to the weather

The average rating of stock market analysts:

Hold