Anglo American Iron-Ore Output Advances 3%, Copper Falls 9%

Oct. 20 (Bloomberg) -- Anglo American Plc, part-owner of the largest platinum and diamond producers, said third-quarter iron-ore output rose 3 percent while the company joined rivals who suffered declines in copper production.

Iron ore output climbed to 12.2 million metric tons as volumes increased in South Africa, where the company’s Kumba Iron Ore unit brought an expansion project online in August, London-based Anglo said. While copper output dropped 9 percent to 139,900 tons during the quarter, 2011 output will be “marginally higher” than in 2010, it said.

Anglo said in February it may spend $85 billion to boost output of copper, nickel and coal at 100 projects over the decade, forecasting that Asian demand for the raw materials will continue to push up prices. The company may lose some of its copper production as Codelco, the largest producer of the metal, said it plans to exercise an option next year to take a stake in Anglo’s Los Bronces and other Chilean operations.

The stock closed 4 percent lower at 2,180.5 pence in London, its lowest in more than two weeks. Anglo has slumped 35 percent this year, compared with a 28 percent drop for BHP Billiton Ltd. and a 41 percent decline for Xstrata Plc.

Anglo’s “production repeats the themes set by BHP and Xstrata,” Liberum Capital Ltd. said in a note to investors. Australian coal output was strong as operations recover from flooding, copper production declined, and Anglo "exacerbates this with a weak quarter in platinum.”

Platinum Output

While Anglo American Platinum’s refined platinum output fell 7 percent in the quarter from a year earlier, equivalent refined platinum, which includes other metals, rose 3 percent to 667,000 ounces. The producer revised its target for full-year cash operating costs to 12,900 rand ($1,596) per equivalent platinum ounce from the 12,500-rand midpoint of its previous guidance, citing higher “consumables, labor and electricity costs.”

Full-year guidance of 2.6 million ounces of refined platinum production “looks achievable,” SBG Securities Ltd. analyst Justin Froneman said in a note.

Anglo’s third-quarter performance is “a mixed bag, but broadly not bad, apart from copper,” Charles Cooper, an analyst at Oriel Securities said by phone from London.

"Copper has been a nightmare for most of the majors,” Cooper said. Difficulties including “strikes going on in Peru and Indonesia for Freeport operations, falling grades, declining production at Escondida,” present “a really interesting supply dynamic for the industry.”

BHP Billiton Ltd. said yesterday its third-quarter copper output fell 24 percent, citing lower grades and strikes at Escondida mine in Chile and smelter and refinery outages at Olympic Dam in Australia. Rio Tinto Group, also a shareholder in Escondida, reported a 32 percent drop.