Anglo cuts diamond forecast
Anglo American cuts its production target for diamonds for the third time this year.
|||London - Anglo American cut its production target for diamonds for the third time this year as demand for the precious stones continued to soften. The company also lowered iron-ore and copper output targets.
The shares dropped as much as 4.5 percent to the weakest level in more than two weeks and traded 3.3 percent lower at 584.4 pence by 8:19 a.m. in London. The stock has fallen 52 percent this year and is the worst performer in the benchmark FTSE 100 index after Glencore Plc.
Full-year diamond output at its De Beers unit will be 29 million carats from an earlier target of 29 million to 31 million carats, the London-based company said in a statement Thursday. De Beers initially sought to produce as many as 34 million carats carats this year. Iron-ore production from Kumba in South Africa would be 43 million tons versus about 44 million previously, while Minas-Rio in Brazil would mine 10 million tons compared with as many as 14 million tons forecast before, it said.
Cooling demand for diamond jewelry in China, the biggest market after the U.S., and an industry credit crunch has sapped demand for the gems, which have fallen about 15 percent in price this year. Anglo, which owns 85 percent of De Beers, is counting on diamond profits to counter slumping earnings from its other units such as platinum, copper and coal. De Beers accounted for more than one third of the company’s first-half underlying earnings.
Third-quarter iron-ore output from Kumba declined 12 percent to 11.4 million tons from a year earlier, while Minas- Rio produced 2.9 million tons in the three months.
“A fairly weak quarter for Anglo, with production decreases reflecting the current state of the markets,” Numis Securities said in a note to investors. The results “broadly disappointed with diamonds, platinum and iron-ore below expectations,” according to Paul Gait, an analyst at Sanford C. Bernstein & Co in London.
Coal forecasts
Anglo maintained its full-year targets for thermal and metallurgical coal and said copper production would be in a range of 680 000 tons to 710 000 tons after the company sold mines to help cut debt.
The commodities slump has undermined CEO Mark Cutifani’s efforts to turn around the fortunes of a business that mines platinum and diamonds in Africa and iron ore in Brazil. To preserve cash, Anglo plans to sell coal, platinum and copper assets and intends to reduce its workforce by more than a third.
Copper production fell 3 percent to 171 100 tons. Output of thermal coal, used by power plants, dropped 2 percent to 8.8 million tons while the metallurgical variety used to make steel rose 8 percent to 5.5 million tons. Platinum output climbed 14 percent to 614 300 ounces, while diamond production retreated 27 percent to 6 million carats.
BLOOMBERG