Anglo American’s diamond unit takes sparkle away from results

Global miner Anglo American (LON:AAL) posted Thursday a 2% increase in overall production during the three months leading to June 30, helped mainly by its giant Minas-Rio iron ore mine in Brazil, but cut diamond guidance for the year as sales remain weak.

Iron ore production rose by 7.1% from a year earlier to 16.4 million in the quarter, with the Kumba division in South Africa contributing 10.5 million tonnes and the Brazilian mine adding another 5.9 million tonnes.

Production at Minas-Rio, one of the world’s largest sources of high-grade iron ore concentrate, was suspended for most of last year because of a slurry pipeline leak, but Anglo was able to undertake optimization work in the meantime.

Anglo needs to secure a final licence to increase the height of the water storage dam in order to keep producing iron ore beyond the end of the year. “The conversion of the installation licence to an operating licence for this lift is expected by year-end, subject to approval by the Minas Gerais state government in Brazil,” the miner said.

Diamond production at the company’s De Beers unit, the world’s biggest miner of precious stones, dropped 14% amid weaker demand and lower prices.

Output at Anglo’s De Beers fell by 11% to 15.6 million carats due to a planned shutdown at the Orapa mine in Botswana and lower mined volumes from Venetia, in South Africa

Ongoing work to switch Anglo’s Venetia operation in South Africa to underground mining from open pit, also weighed on the division’s second quarter results.

Forecast diamond production for the year was pegged at 31 million carats, at the bottom end of a previous estimate range.

“While overall retail sentiment for diamond jewelry in the US remains solid, a more challenging environment in China and higher-than-normal polished diamond inventories in the midstream resulted in a cautious approach from rough-diamond buyers during the fifth cycle of 2019,” De Beers chief executive officer, Bruce Cleaver, said in a separate statement.

The world’s number four diversified miner also reported that metallurgical coal’s (also called coking coal) output rose by 11%, while thermal coal, used for power, fell 8%.