January 23, 2020 / 8:02 AM / a month ago

Anglo American output held back by Chile drought, diamond weakness

(Reuters) - Anglo American (AAL.L) said on Thursday that water shortages at its Los Bronces mine in Chile had weighed on the global miner’s copper output in the fourth quarter, while rough diamond production was hurt by a softer global market.

FILE PHOTO: The logo of Anglo American is seen on a jacket of an employee at the Los Bronces copper mine, in the outskirts of Santiago, Chile March 14, 2019 REUTERS/Rodrigo Garrido

The miner, however, reported a 4% rise in total production for the final quarter of 2019 as it ramped up output from its Minas-Rio iron ore mine in Brazil.

It had reported a 7% increase in total production on a copper equivalent basis for the fourth quarter of 2018.

Copper production for the latest quarter dropped 13% to 159 kilo tonnes (kt) and output from the Los Bronces mine slumped 28%, hurt by the drought in Chile.

“Increased production at Metallurgical Coal in Australia was offset by the drought in Chile ... as well as the anticipated lower production from De Beers,” Chief Executive Officer Mark Cutifani said.

Rough diamond production fell 15% to 7.8 million carats, as the company cut output in response to global weakness.

Challenges in the diamond market stemmed from a combination of factors including soft demand due to protests in Hong Kong, and the impact of the Sino-U.S. trade dispute. Some analysts blame it on laboratory-grown diamonds.

Anglo said it stood by its 2020 production guidance of 620,000-670,000 tonnes of copper and 32-34 million carats of diamonds.

The bluechip miner’s shares fell 1.5% in early trade.

CHILE WOES

Anglo, which has been battling water shortages at its Los Bronces mine in Chile since 2012, has developed a water recycling system to transport water through a 56 km (35 mile) pipeline from a tailings dam to Los Bronces, after which the mine recycles more than 70% of the available water.

Companies operating Chile’s vast copper mines have warned that anti-government protests, strikes and road blockades had taken a toll.

As the protests subside, market watchers are looking to gauge potential impacts on investment decisions by the many large mining companies operating in Chile such as BHP (BHPB.L) and Glencore (GLEN.L).

Anglo, which is listed in London and Johannesburg, has interests in four projects in Chile, the country that produces nearly a third of the world’s copper.

In Brazil, Anglo in December received the final operating license it needs to boost production at its Minas-Rio mine to its full capacity.

The license was issued after Anglo boosted the storage capacity at the site for waste known as tailings. Waste disposal is a sensitive issue after a tailings dam collapsed at a Vale (VALE3.SA) mine in Brazil, killing some 300 people.

Reporting by Shanima A and Noor Zainab Hussain in Bengaluru, Editing by Mark Trevelyan

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