Miner Anglo American posted a 9 percent drop in third-quarter copper output, blaming lower grades and blizzards in Chile, and said full-year production would be above 2010, thanks to the expansion of Los Bronces.
The expansion of the flagship Los Bronces mine in Chile is on track for first production in the fourth quarter, it said, while commissioning of the Collahuasi expansion is under way.
Anglo is the latest of the majors to report lackluster copper production, with Rio Tinto, BHP Billiton and Xstrata all reporting weaker output of the red metal and falling short of expectations. Freeport McMahan, the world's largest listed copper miner, cut its 2011 sales target, citing an uncertain outlook.
Anglo attributed the dip in copper production to lower grades at Collahuasi, Los Bronces and Mantos Blancos and bad weather at Collahuasi, which saw heavy snow.
Analysts said the fall was largely expected — Collahuasi partner Xstrata having already signaled a production drop — with concerns focusing instead on broader worries about demand and the possibility that Chilean state-owned miner Codelco will exercise an option in January to take an up to 49 percent stake in Anglo's southern Chilean properties, including Los Bronces.
"Next year would have been quite a big year, with Los Bronces, but if the Codelco option is exercised it will lose some of that growth," said analyst Des Kilalea at RBC Capital Markets in London.
"What happened in copper is disappointing, but it was pretty well telegraphed (through the Xstrata numbers). More important is what is happening in the global economy and what Anglo will choose to do if it receives a whole lot of money from the Codelco option."
Codelco, the world's largest miner, said last week that it could exercise an option to take a 49 percent equity stake in Anglo American Sur, a division that includes Los Bronces.
Anglo reiterated on Thursday that it was considering the implications of Codelco's announcement.
Shares in Anglo were down 2.7 percent at 0720 GMT, broadly in line with a 2.6 percent drop in the sector, again battered by euro-zone debt worries.
SOUTH AFRICAN STRIKES HIT
Copper, which accounts for almost a third of profit, is the second-largest contributor to Anglo's bottom line after iron ore, where production rose 3 percent to 12.2 million tonnes, boosted by Kumba Iron Ore's Sishen mine.
The growth rate is well below bullish production jumps seen at other miners including BHP and Rio, the latter hitting sales records despite uncertainty over price and Chinese demand.
Production from Anglo's metallurgical coal division grew 5 percent to 8 million tonnes, thanks to a 24 percent jump and record production from its Australian open cut operations. Excluding thermal coal within that division, met coal dipped 4 percent, dented by longwall moves at underground operations.
Its thermal coal division was hit by strikes in South Africa, with production from South Africa and Colombia dipping 10 percent.
Both coal and iron ore, however, saw rising sales.
Nickel production increased 14 percent to 6,500 tonnes, as Barro Alto ramps up, while refined platinum production dipped 7 percent to 647,000 ounces.
The key to Anglo's future performance and production is its hefty project pipeline, including Barro Alto Nickel and the Minas Rio project, both in Brazil, which could help the group nearly double iron ore production by 2014.
Anglo said Minas Rio construction was progressing, with first ore on ship expected in the second half of 2013.
© 2023 Thomson/Reuters. All rights reserved.