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Anglo American warns of writedowns despite hitting production targets

Anglo American delivers first ore from Minas-RioDiversified global mining company Anglo American has warned that a sharp drop in commodity prices will result in impairment charges for its 2014 financial year, despite the generally positive operational performance.

Delivering its annual production report ahead of its guidance for key commodities, pointed out that it had been a turbulent year, especially for bulk commodities. Although few details were given, the report suggested that coal and iron ore could potentially be affected. This reflects the toll that the commodity price decline in is taking on the global mining industry.

Iron ore delivers strong results

This comes despite Anglo American’s ramp up of iron-ore production, which has resulted in 8.9 Mt in 2014, exceeding its forecast of 45 to 46 Mt. This is partly due to the 10% increase at Kumba Iron Ore to 12.4 Mt following implementation of the production recovery plan and Anglo American Operating Model at Sishen.

It also includes 688 000 t from its Brazilian Minas-Rio project, which despite falling prices as economic growth slows, especially in China, Minas-Rio has achieved its first ore on ship on 25 October 2014 after production started in the quarter.

Looking at coal increases

The mining giant also saw export metallurgical coal production increase by 4% to 4.9 Mt due to a step change in performance at Grasstree and Q4 2013 longwall moves. Anglo produced 20.9 Mt of coal for 2014, which is in line with its forecast of 20 Mt to 21 Mt. Export thermal coal production also increased by 2% to 9.7 million tonnes mainly due to increases across Australian and South African operations.

Refined platinum up 14%

Equivalent refined platinum production increased by 14% to 593 900 oz mainly due to higher production at Amandelbult, Rustenburg and Union mines as Q4 2013 was impacted by industrial action. Mogalakwena also increased production in Q4 2014 due to increased throughput at the concentrator and mining productivity improvements.

Decreases in copper, nickel and diamonds

Despite otherwise generally positive results, copper production decreased by 18% to 174 800 t, primarily as a result of the expected grade declines at Los Bronces and Collahuasi. As expected, nickel production also decreased by 34% to 6 700 tonnes due to the Barro Alto Line 2 furnace rebuild, which commenced in October.

Furthermore, diamond production decreased by 8% to 8.4 million carats compared with Q4 2013 due to lower grades at Orapa and Venetia, combined with lower production at Snap Lake as a result of a mandatory safety stoppage.

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