Anglo American shares tumbled 7.9% to 3,712.5p in late morning trading on Thursday, following a 10% drop in production over the quarter compared to the same period last year.
The mining giant blamed its lower production on high rates of Covid-19 absences, high rainfall impacting operations in South Africa and Brazil and a series of safety and operational hurdles at metallurgical coal and iron ore projects.
Anglo American confirmed a full cost guidance increase of 9%, reflecting a 4% knock-on effect from stronger producer currencies and 3% from inflationary pressures, especially diesel costs.
The group’s metallurgical coal production dropped by 32% as a result of a delayed longwall move and a fatal underground incident at Moranbah, with full-year guidance revised to 17-19 million tonnes, down from 20-22 million tonnes.
The firm also blamed the end of production at its Grasstree operation and the suspension of its Grosvenor and Aquila life-extension projects, which restarted operations in mid-February, as contributing factors to production decline.
Anglo American’s iron ore production decreased by 19% as a result of high rainfall and plant issues in Kumba and Minas-Rio, with full-year guidance scaled down to 60-64 million tonnes from 63-67 million tonnes.
The mining company also reported a 13% decrease in copper production due to planned lower grades, along with a 6% fall in metal in concentrate production from its Platinum Group Metals operation due to high rainfall in Mogalakwena, and reported a full-year guidance drop to 3.9-4.3 million ounces compared to 4.1-4.5 million ounces.
It wasn’t all bad news for the group, however, with a reported 25% increase in rough diamond production reflecting a high operational performance and lower rainfall impact, especially across its Botswana projects.
“This challenging start to the year highlights the importance of adhering to our Operating Model to stabilise performance after the necessary disruptions of the last two years as we adapted to – and now learn to live with – Covid,” said Anglo American CEO Mark Cutifani.
“As a result, we are updating our platinum group metals, iron ore and metallurgical coal volume guidance for the full year, and our unit cost guidance for most product groups to also reflect up to date exchange rates and the inflationary pressure on many input prices, particularly diesel.”