Anglo American has cited failures at Transnet and a water crisis in Rustenburg as some of the constraints it grappled with locally in the third quarter as it lowered copper production guidance for the year.
In its third quarter production report released this week, the globally diversified group said total sales at subsidiary Kumba Iron Ore declined 11% year on year to 8.9Mt during the quarter, and by 6% quarter on quarter. Production was 2% lower y/y at 9.7Mt.
“Multiple Transnet equipment failures and adverse weather conditions at Saldanha Bay in September impacted ship loading,” said Kumba CEO Mpumi Zikalala.
Despite the equipment failures, Kumba will retain its 2023 sales guidance of between 36Mt and 38Mt “subject to logistics constraints”. The company said a positive in the quarter was the reopening of the rail and port schedule following Transnet’s annual maintenance shutdown.
Rail performance was 10% better q/q, it said. The second quarter had been marked by cable theft and derailments.
“Security measures deployed in collaboration with members of the ore users’ forum (OUF) have proven effective to date and no further incidents were experienced during the third quarter of 2023,” the Kumba report said.
Kumba is part of the OUF, which is helping Transnet with the maintenance and safety of the iron ore export channel. It is also part of the national logistics crisis committee, established by the Presidency to find solutions to freight logistics challenges.
Ed Gooden, a mining research analyst at Panmure Gordon, said Kumba accounts for two-thirds of Anglo’s iron ore production, which is up 6% year to date.
“However, iron ore sales were down 12% due to Transnet equipment problems. This value should be released though, as stocks can be unloaded if and when Transnet can achieve more consistency, following the annual maintenance shutdown. Iron ore accounts for 15%-20% of group revenue.”
He expects rail-related challenges to continue having a small impact on revenue.
At Anglo American Platinum, production fell 9% to 909,700oz due to an “unplanned multimunicipal water stoppage” in July at the group’s processing operations in Rustenburg.
The Bojanala Platinum District Municipality was hit with water supply challenges that resulted in intermittent supply, rationing and the collapse of sewerage infrastructure
The Bojanala Platinum District Municipality was hit with water supply challenges that resulted in intermittent supply, rationing and the collapse of sewerage infrastructure.
Electricity “load curtailment” — scheduled power outages by Eskom — was less of an issue for Amplats in the quarter compared with the same period last year. It reported 5,000oz in production were deferred, compared with 38,900oz in the second quarter ended June 2023, when load curtailment led to the loss of 29 production days."
At De Beers, rough diamond production fell 23% to 7.4-million carats, primarily due to operational changes at its Venetia mine and planned maintenance in Botswana.
According to Gooden, diamond production for the year to date is down 10%, which is significant. “However, diamond revenue is 6%-9% of group revenue; so meaningful, but not huge.”
De Beers invested $2.3bn (about R48bn) to take Venetia, South Africa’s leading diamond mine, underground, helping to extend its life to 2046.
“I would say Anglo has a fairly balanced production and sales profile going into the fourth quarter, given commodity price movements recently and some adjustments to guidance, for example copper,” said Gooden.
After weak production at Anglo’s Los Bronces copper mine in Chile in the third quarter, the group said it expects copper production to range between 830,000Mt and 870,000Mt, down from a previous estimate of between 840,000Mt and 930,000Mt. This was despite a 42% jump in copper production as Quellaveco in Peru ramped up.
Production at Los Bronces fell 20% on lower grades as a result of high ore hardness and an electrical substation fire that interrupted the power supply for 16 days.
CEO Duncan Wanblad said production in the third quarter was consistent with the same period in 2022.
“A 42% increase in copper production as Quellaveco’s contribution ramps up was offset primarily by De Beers as Venetia transitions to underground operations, and by … the underground steelmaking-coal operations [at Moranbah and Grosvenor in Australia].”
Reuters has reported that Anglo is cutting corporate office jobs across several countries. Unions said its South African iron ore business plans to lay off scores of employees at head office.
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