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Anglo American profits down by 7 percent

Publishing Date : 07 August, 2018

Author : REARABILWE RAMAPHANE

Global Mining Giant Anglo American, a multinational company with significant interest in Botswana‘s most valuable economic resource Diamonds  reported declined  profits for the half year ended June 30 but realised an increase in Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA).


This is according to the company’s half year financial performance report released on Thursday 26th. The Botswana Stock Exchange (BSE) listed mining conglomerate underlying EBITDA increased by 11 percent to $4.6 billion (about P47.3 billion) compared to $4.1 billion (about P4.2 billion) registered in the half year ended June 2017.


Anglo reports that this was driven by strong pricing across the Group, particularly in copper and the platinum basket of metals, and continued productivity improvements and cost control across the portfolio, more than offsetting the impact of inflation across the Group and suspension of Minas-Rio operations


The Group Chief Executive Officer (CEO), Mark Cutifani noted that Anglo American has also made good progress against disciplined capital allocation objectives, strengthening the balance sheet with net debt down to $4 billion (about P41 billion), delivering an increase in the dividend commensurate with earnings, and continuing to invest prudently across the business. “This strong financial result derives from our consistent productivity improvements in the underlying operations and a stronger price environment for many of our products,” he said.  


Cutifani further stated that his diversified Mining Group has realised significant productivity improvements delivering a further two percentage point improvement in the first six months of 2018. “A 6% increase in copper equivalent production volume helped deliver $0.4 billion (about P4.1 billion) of cost and volume improvements in the first half, out of the $0.8 billion (about P8.2 billion) targeted for the full year, against a backdrop of rising input cost inflation and the temporary suspension at Minas-Rio,” he said.


According to the CEO, Anglo American forecasts better profitability and continued growth in production going into the last lap of 2018. “We project enhanced returns from our diversified portfolio, with our business model and relentless focus on innovation and business improvement resetting our performance benchmarks,” he said. “As we now move forward to develop the world-class Quellaveco copper project in Peru, in conjunction with our partner Mitsubishi, we are excited about the opportunities we see across the business.”


Further financial figures mirrors that the group Increased volumes across its  portfolio benefited underlying EBITDA by $0.2 billion (about P2 billion), driven by a robust performance at Metallurgical Coal’s longwall operations and higher grades and strong mine and plant performance at Copper, as well as Platinum drawing down refined inventory levels.


Lower export thermal coal production from South Africa partly offset these improvements. The Group’s cost improvements benefited underlying EBITDA by $0.2 billion, with cost reductions outweighing the effects of above-CPI inflationary pressure on the mining industry related to higher diesel and electricity prices.


The positive cost achievement reflected the improved operational performance at Metallurgical Coal’s Moranbah-Grosvenor complex and continued cost-saving initiatives at Platinum and Copper.   However Profit for the financial period under review decreased by 7% to $1.6 billion compared to $1.8 billion in the corresponding period last year  


Cutifani highlighted that his company continued to drive improvement in asset performance through the Operating Model, facilitated by an enhanced focus on the Group’s key assets as a result of work undertaken to upgrade the portfolio. Copper equivalent production increased by 6%, excluding the impact of the stoppage at Minas-Rio, primarily driven by a continued strong performance at Metallurgical Coal, Copper and De Beers, as well as improved production at Platinum, partly offset by geological challenges at Thermal Coal – South Africa.  


Metallurgical coal production increased by 17 percent to 10.8 Mt driven by a sustained strong performance from Moranbah and the full ramp-up of Grosvenor.   Copper production rose by 10 percent to 312,900 tonnes compared to 283,400 tonnes in 2017 half year, driven by productivity improvements at mine and plant and planned higher ore grades at both Los Bronces and Collahuasi. This more than offset the effect of a three-month planned maintenance at Collahuasi that was completed in July 2018.   


De Beers’ rough diamond production increased by 8 percent to 17.5 million carats, in line with the expected continuation of strong demand. This was facilitated by the contribution from the ramp-up of Gahcho Kué in Canada and an incremental increase at Jwaneng, partly offset by the temporary suspension of production at Venetia following a fatality.  


At Platinum, production of platinum increased by 4 percent to 1,233,400 ounces compared to  1,189,100 ounces in the previous period and palladium by 5 percent to 813,200 ounces compared to 774,900 ounces in 2017 half year. This was driven, in particular, by a robust performance at Mogalakwena. Refined metal production decreased by 3 percent for platinum, to 1,075,300 ounces against 1,105,600 ounces in 2017 and by 6 percent for palladium, to 686,500 ounces against 726,500 ounces half year 2017 as planned maintenance constrained processing capacity. 

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