Anglo American slashes copper cost guidance to 145 cents, shares jump 5%

Key Takeaways:

Anglo American cut copper unit cost guidance to about 145 cents/lb from 172 cents/lb
Shares rose 5% to 3,703p as full-year copper production guidance was maintained
H1 copper output was 343,600 tons, roughly flat year-over-year

Anglo American cut its copper unit cost guidance to about 145 cents a pound from roughly 172 cents, sending shares up 5% to 3,703p.

"The cost reduction reflects higher by-product credits and favorable exchange rate movements," the London-listed miner said in its second-quarter production report Thursday.

Anglo American produced 343,600 tons of copper in the first half, up from 342,200 tons a year earlier. Second-quarter output was 173,200 tons, roughly flat versus the prior year. The company maintained its full-year production target of 700,000 to 760,000 tons.

The copper business will define Anglo American after its planned merger with Teck Resources, which remains on track with Chinese approval as the final regulatory hurdle. The deal would create the world's fifth-largest copper producer.

Diamonds and Coal Weigh on Earnings

Diamond output rose 88% in the second quarter to 7.8 million carats from 4.1 million carats, yet Anglo American said weak demand and lower prices continued to pressure the market. The company expects its diamonds and steelmaking coal businesses to post negative underlying earnings in the first half.

Steelmaking coal production fell to 2 million tons from 2.1 million tons, while nickel output declined 4% to 9,100 tons. Iron ore production dropped to 15.4 million tons from 15.9 million tons, driven by planned plant maintenance at South Africa's Kumba and lower ore grades at Brazil's Minas-Rio.

De Beers Separation Advances

Anglo American has selected a preferred consortium led by former De Beers Chief Executive Gareth Penny to acquire the diamond unit. Botswana, which owns 15% of De Beers, is considering whether to exercise its right of first refusal and buy the stake itself or through a third party, a government official said.

The cost guidance cut positions Anglo American's copper operations more competitively against peers such as Freeport-McMoRan and BHP Group, which report all-in sustaining costs in the $1.50-to-$1.80-per-pound range for their South American operations.

This article is for informational purposes only and does not constitute investment advice.