28th Jan 2016 13:17
LONDON (Alliance News) - Anglo American PLC shares rose on Thursday after it increased production of its main commodity, iron ore, by more than 10% during 2015 and said it plans to lower costs to counter lower iron ore prices.
Although Anglo American reported rises in production of its main commodity, the miner reported falls in production across most of its others.
Anglo American shares were up 9.5% to 277.80 pence per share on Thursday afternoon, the best performer in the FTSE 100.
The miner produced 54.1 million tonnes of iron ore during the year, more than a 10% rise from the 48.9 million tonnes produced in 2014, as the continuing ramp up of the Minas Rio mine in Brazil offset a decline in production from the Kumba hub in South Africa.
Production from Kumba in South Africa fell 7% year-on-year to 44.9 million tonnes whilst the Minas Rio mine in Brazil produced a total of 9.2 million tonnes in the year after only producing a 688,000 tonnes in 2014. Production from Kumba fell mainly as a result of the Shishen mine being transitioned to a lower-cost pit configuration.
The increase in production comes despite increased pressure on iron ore prices. Each dry metric tonne produced from Kumba achieved an average of only USD54 in 2015 compared to USD91 a tonne a year earlier, whilst production from Minas-Rio achieved a price of USD41 per wet metric tonne compared to USD57 a tonne in 2014.
Anglo American looks set to continue pumping out production by countering lower prices through cost reductions at its mines.
The FTSE 100-listed miner said the production strategy for Minas-Rio is being revised to ensure lower operating costs, whilst the work at the Shishen mine will lead to lower production and materially lower waste stripping volumes, resulting in a planned mine configuration that will have a materially lower cost base, it said.
Metallurgical coal production in the year rose 1% to 21.2 million tonnes due to strong operational performances at both Grasstree and Moranbah in Australia, whilst thermal coal production dropped 2% year-on-year to 33.8 million tonnes due to the impact of strikes in South Africa and weather related production issues at Cerrejón in Colombia.
Prices for all of its coals extracted from Australia, Canada, South Africa and Colombia fell during 2015 within a range of 2% to 24%.
Copper production decreased 5% in 2015 to 708,800 tonnes, partly driven by the loss of production from the sale of the AA Norte assets in September. Production from retained assets during 2015 fell by only 1%.
Copper prices were down 24% year-on-year to only USD228 per pound compared to USD300 a year ago.
Diamond production declined 12% to 28.7 million carats from 32.6 million carats in 2014, reflecting the decision to reduce production in response to trading conditions.
Platinum was the only commodity to experience a material rise in production for the year, increasing 25% to 2.4 million ounces.
Production was higher overall in the fourth quarter of 2015, with production of metallurgical coal rising 11% year-on-year whilst copper rose 4% from the fourth quarter of 2014. Nickel production also was up 57% in the quarter but all other commodities experienced falls.
Although iron ore production from Kumba fell 12% year-on-year in the fourth quarter, the contribution from Minas-Rio boosted overall quarterly production by more than 8% to 14.2 million tonnes from 13.1 million tonnes.
By Joshua Warner; [email protected]; @JoshAlliance
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