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Anglo to Miss Iron-Ore Forecast as Quarterly Output Slips

Anglo American Plc (AAL), a mining company with operations from Australia to Chile, will miss its forecast for iron-ore shipments this year after third-quarter production of the steelmaking material fell 24 percent.

“Export sales volumes for 2013 are anticipated to be lower than the previously guided 40 million metric tons and are dependent on production levels,” the London-based company said today in a statement. Iron-ore output dropped to 9.47 million tons in the past quarter from 12.5 million tons a year earlier.

Anglo’s Kumba Iron Ore unit has struggled with depletion at the Sishen mine, its biggest operation, which also underwent halts for safety checks in August. With iron ore accounting for the largest share of revenue last year, Anglo will seek to restore growth at the division to help reverse a drop in profit.

“At the very least we have to assume that iron-ore production is going to be down next year by about 6 to 8 million tons,” Aneek Haq, an analyst at Exane Ltd., said by telephone from London. “If that is the case, your earnings forecast will need to be cut as well.”

Anglo may report underlying earnings of $2.07 billion this year, according to the average estimate of 20 analysts surveyed by Bloomberg. Profit by that measure fell 54 percent to $2.84 billion in 2012 following a decline in commodity prices and an increase in operating costs.

Digging Deeper

Kumba Iron Ore (KIO), 70 percent-owned by Anglo, said this week it will need additional state permission to access a third of Sishen’s reserves as it digs further into the ore body to counter depletion. Kumba will present a plan to address these “pit constraints” and a longer-term operational strategy for Sishen by year-end, Anglo said today.

Kumba fell 7.6 percent to 438.06 rand by the close in Johannesburg trading, the biggest decline in four months. Anglo, which also mines coal, platinum, diamonds and copper, fell 1.4 percent to 1,532 pence in London.

Copper production jumped 32 percent in the third quarter to 207,300 tons, today’s statement shows. Output of the metal at Anglo’s Los Bronces mine in Chile rose 22 percent to 106,400 tons, while volumes from its Collahuasi venture with Glencore Xstrata Plc (GLEN) more than doubled to 63,600 tons as the mine’s ramp-up continued.

Production at De Beers, the diamond producer 85 percent-owned by Anglo, increased 21 percent in the period to 7.7 million carats. Together with the copper division, De Beers’ volumes helped counter the lower output from Kumba, said Ben Davis, an analyst at Liberum Capital Ltd. in London.

Cancel Out

“I’d say it does cancel it out,” Davis said by phone. “If they can get past these constraints at Kumba by the end of the year then it is not too bad. Copper will be up at these higher rates for the next couple of years.”

Anglo is targeting a $1.3 billion increase in annual cash flow as well as asset sales following a review of operations, Chief Executive Officer Mark Cutifani said in July. The company, which has identified 15 assets for possible divestment, withdrew last month from the Pebble copper project in Alaska.

Platinum-equivalent refined production at Anglo American Platinum Ltd. (AMS) was little changed in the third quarter at 623,000 ounces. Production of export metallurgical coal, used in steelmaking, increased 9 percent to 4.9 million tons. Output of export thermal coal from South Africa declined 1 percent, while Colombian production advanced 13 percent.

To contact the reporter on this story: Andre Janse van Vuuren in Johannesburg at ajansevanvuu@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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