* Solid production could lead to earnings forecast upgrades
* Iron ore output climbs but some constrains remain at
* Copper division benefits from higher grades than expected
By Silvia Antonioli
LONDON, Jan 29 Anglo American on
Wednesday produced a forecast-beating rise in fourth quarter
iron ore output and a new quarterly record for copper, a sign
efforts to improve performance at its major mines are starting
to pay off.
Anglo, the fifth-largest diversified mining group, has
embarked on an overhaul plan under chief executive Mark
Cutifani, after years of sector-lagging returns.
Cutifani said in December the plan would focus mainly on
improving operations of major mines but did not envisage
immediate asset sales.
Anglo has long lagged rivals in returns and share
performance. Its shares have lost about 60 percent of their
value in the last three years compared with a 40 percent decline
for the sector.
In the past two years, it has been hit by labour troubles in
South Africa, operational hiccups at copper mines and
multibillion-dollar cost overruns in Brazil.
The fourth-quarter production figures helped to boost
Anglo's shares which were one of the top gainers in the FTSE 100
index. They rose as much as seven percent and were up almost 5
percent at 1,410.5 pence by 1146 GMT, outperforming a 1.3
percent increase in the sector.
"Such strong Q4 production will drive 2013 earnings upgrades
but whether this translates into 2014 earnings upgrades will
remain to be seen," Nomura analysts said in a note.
Production of iron ore - the largest contributor to Anglo's
profit in 2012 - at its Kumba Iron Ore business rose by
25 percent to 11.3 million tonnes in the fourth quarter from the
same period a year earlier when it was hit by a strike. This
beat analysts forecasts and the company's own guidance.
It was also an improvement on the third quarter, when
production dropped due to pit constraints at Kumba's Sishen mine
in South Africa's Northern Cape Province and regulatory safety
stoppages in August.
Anglo said Sishen was still constrained by waste material,
which reduces the availability of material supplied to
processing plants. There is a plan underway to address this and
improve the long-term operations, it said.
"We continue to warm up to the company despite the
significant operational headwinds it faces over the next year,"
Barclays said in a note.
Copper, the second largest contributor to Anglo's profits
last year, achieved a quarterly output record, up 24 percent to
The increase reflected a production rise at the Los Bronces
mine in Chile and a doubling of production and higher grades at
the Collahuasi mine, a joint venture with Glencore Xstrata
, which offset a decline at El Soldado also in Chile.
"The copper performance was particularly strong because
grades remained very high at the two main mines. I think this
could translate in 300-400 million in additional EBIT for the
company," another analyst said.
In platinum, Anglo is battling strikes over wages and also a
margin squeeze due to higher costs and lower prices. The company
is planning to cut jobs and mothball unprofitable operations.
A strike by platinum miners in South Africa, which has cut
output at the world's three top producers, is costing Anglo's
platinum business Anglo American Platinum about 4,000
ounces of platinum production a day resulting in 100 million
rand ($9.11 million) of lost daily revenue.
In the fourth quarter, equivalent refined platinum
production increased by 25 percent to 520,300 ounces from the
same period last year. The increase was helped by higher
production from the Mogalakwena mine in South Africa.
Anglo's diamond output also beat forecasts, up 13 percent in
the fourth quarter to 9.1 million carats, mainly due to a
recovery at Jwaneng operations in Botswana.
Anglo American will announce its 2013 preliminary results on