Anglo American Plc (AAL), the year’s fourth-worst performing FTSE 100 Index stock, cut its platinum output forecast after strikes in South Africa and said its $5.8 billion Minas-Rio iron-ore project will see more cost overruns.
Anglo American Platinum Ltd. (AMS) targets production of 2.2 million to 2.4 million ounces for 2012, it said in a statement today, compared with a July figure of 2.4 million to 2.5 million ounces. Pay strikes in South Africa also cut output at Anglo’s Kumba Iron Ore Ltd. (KIO) unit by 2.2 million metric tons.
The Minas-Rio cost increases, at least the fifth that Anglo is preparing to announce, may hurt Chief Executive Officer Cynthia Carroll’s ability to stem a share slump. Anglo has dropped 21 percent this year in London, compared with a 6 percent gain by rival BHP Billiton Ltd. (BHP), while Xstrata Plc (XTA) is little changed. Seven of 31 analysts surveyed by Bloomberg recommend buying the stock, with 18 hold and six sell calls.
Anglo said shipments should start from Minas-Rio, bought in 2008 and the company’s largest project, in the second half of 2014. That’s provided “all current impediments” are cleared by year-end and there are no “major unexpected interventions,” it said today.
Platinum strikes in the third quarter cut production by 42,000 ounces and pushed cash operating costs up by 8 percent, the company said.
Anglo American Platinum fired 12,000 workers on Oct. 5 after wildcat strikes at South Africa’s Rustenburg. Walkouts starting in platinum mines spread to gold, coal and iron ore as workers demand higher pay. While refined platinum output edged up 0.3 percent to 649,000 ounces from a year earlier, equivalent refined platinum, including other metals, slid 6 percent to 626,000 ounces.
The drop was “better than we expected, but the full impact of the strike is yet to be felt,” Bank of America Corp. analysts said.
The average daily loss to platinum production is 4,500 ounces, including 3,800 ounces from the company’s own mines, Anglo American said in a separate statement. It cut planned capital spending on the metal to 6.5 billion rand ($750 million) this year, while unit costs are seen reaching 15,500 rand to 16,000 rand for each equivalent refined ounce.
Anglo is also losing nickel production at Loma de Niquel in Venezuela, where the 13 of the operation’s concessions have been canceled. The remaining three are due to expire Nov. 10 and, “if there is no development in this situation in the coming weeks, then there will be no further production contribution from this operation,” the company said.
Loma de Niquel was halted last month, the company said, without giving details. The operation accounted for 13,400 metric tons of Anglo’s 29,100 tons of nickel production last year.
Anglo American’s iron-ore output increased 14 percent to 12.5 million metric tons on growth at Kumba’s Kolomela mine. The site’s production of 2.5 million tons was a 44 percent gain on the prior quarter and reflected the mine reaching designed capacity earlier than scheduled in July. Kumba expects Kolomela to produce at least 7 million tons in 2012, with full output of 9 million tons in 2013.
Copper output expanded 12 percent to 157,300 tons in the quarter on increased volumes at Los Bronces mine. The project increased output 84 percent, contributing 48,900 tons of copper in the quarter even as metal grades declined, Anglo said.
Platinum production at the Union North and South mines fell 23 percent and 26 percent respectively because of lower grades. Output at Mogalakwena was reduced by the breakdown of the primary crusher at the North concentrator and lower “head grade,” the company said, referring to the ore leaving the mine and entering the processing plant.
Anglo, owner of 85 percent of De Beers, the biggest diamond producer by value, cut output of the stones 31 percent to 6.4 million carats in the third quarter, “largely in response to market conditions and the Jwaneng slope failure in June 2012 which temporarily prevented access to the main ore body,” it said in the statement.
“De Beers was a small ‘miss,’ but within the usual margin of error,” Peter Davey, head of metals and mining research at Standard Bank Group Ltd. in London, said in a note to investors. “But today’s release does now point toward the low end of its guidance for full-year 2012” of 28 million carats, he said.
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