Anglo American plc (LON:AAL) has provided an update on its performance during 2023 and setting out capital expenditure and production guidance for the next three financial years.
Duncan Wanblad, Chief Executive of Anglo American, said: “The prospects for mined products have rarely looked better. In the near term, given continuing elevated macro volatility, we are being deliberate in reducing our costs and prioritising our capital to drive more profitable production on a sustainable basis. We are focused on what we can control – safety, operational discipline and capital allocation. We are confident in our actions to sustain the competitiveness of our world class assets and deliver on our outstanding growth opportunities in the metals and minerals that are so critical now and for generations to come.
“We are building a platform for strengthened and sustainable operational and financial performance. We took early action in 2023 to increase business resilience in the face of ongoing economic and geopolitical volatility and the current cyclical weakness in PGMs and diamonds. As a result, we have already gone a long way towards reducing our business support costs by $0.5 billion by mid-2024, with an additional $0.5 billion in annual cost efficiencies identified across our global businesses that we expect to deliver in 2024.
“Operationally, we are improving cost performance and cash generation by reconfiguring a number of our assets to adjust the production profile to near term constraints and market conditions, and thereby also protect longer term value. This includes reducing production at Kumba in line with prolonged logistics constraints, focusing on higher margin own-production through our PGMs processing facilities, and moving to one plant at the Los Bronces copper operation in Chile. As a result of such initiatives, we expect to deliver lower unit costs in 2024, despite high inflation, and $1.8 billion lower capital expenditure in the 2023 to 2026 period(1).
“Anglo American’s differentiated investment proposition is underpinned by the high quality and diversification of our portfolio, which includes a number of unmatched resources and industry leading positions. Each of our businesses has a dynamic role within the overall portfolio, at different times delivering cash returns and supporting through-the-cycle investment – in copper and crop nutrients in particular – positioning us well to supply into structural long term demand growth.”
Guidance outlook:
2023
· Production increased by c.3%(2): Quellaveco copper ramp-up and solid iron ore production, offset by ore grades in Chile and lower PGMs and diamonds production
· Unit costs up c.5%(3): due to CPI and mining inflation, with some production impacts
· Effective tax rate: c.39%: due to change in profit mix to higher tax jurisdictions
· Capex of c.$5.8 billion: a reduction of c.$0.2 billion, due to prioritisation
· Year-end working capital build of c.$1.5 billion, subject to pricing
2024
· Production expected to decrease by c.4%(2): production rescheduled to enhance value and reduce unit costs
· Unit costs expected to decrease by c.2%(3): cost discipline more than offsetting inflation
· Capex of c.$5.7 billion (a reduction of c.$0.8 billion) and includes Woodsmith
2025
· Production expected to decrease by a further c.3%(2): production changes to enhance value and reduce unit costs, and scheduled maintenance
· Capex of c.$5.7 billion (a reduction of c.$0.4 billion), including Woodsmith
2026
· Production expected to increase by c.4%(2): benefiting from higher volumes in copper, iron ore, steelmaking coal and diamonds
· Capex of c.$5.3 billion, including Woodsmith
Duncan Wanblad concluded: “Looking ahead, the fundamental supply and demand picture for many metals and minerals is ever more attractive. Many of the world’s major economies are focusing their resources on meeting global decarbonisation timelines and, as the global population grows, continues to urbanise and demands higher living standards, we expect unprecedented demand for responsibly produced raw materials. We are improving our resilience and ensuring we are set up to grow the value of our business into the major demand trends, drawing on the bench of well sequenced margin-enhancing project options within Anglo American.”
Footnotes:
(1) Capex savings in 2023-2025 calculated against most recently published guidance. 2026 capex saving of
~$0.4 billion is versus previous budget.
(2) Copper equivalent production basis. Calculated including the equity share of De Beers’ production and using long term consensus parameters. Future production levels are indicative and subject to final approval.
(3) Copper equivalent unit costs are shown on nominal terms and calculated as the total USD cost base divided by copper equivalent production.
The presentation which contains the details relating to the information referred to above will be available on the Anglo American website at 7.00am UK time today at: www.angloamerican.com/investors/investor-presentations
