Anglo American's dynamic shift: Optimism in copper, adjustments in diamonds

The mining giant Anglo American (LON: AAL) displayed optimism regarding the copper market, with an 11% surge in output during the first quarter. However, the company adjusted its diamond production targets for 2024 downward due to persistently high inventory levels and a gradual market recovery.

The notable increase in copper production, totaling 198,000 tonnes, was largely attributed to the exceptional performance of the Quellaveco mine in Peru, achieving its peak throughput rate. In Chile, where Anglo American operates the majority of its copper ventures, production rose by 6%, driven by robust performances at the Collahuasi and El Soldado mines, offsetting a weaker quarter at Los Bronces.

Although the annual copper output target remained steady at 730,000-790,000 tonnes, operations in Chile, the world's leading copper producer, are anticipated to be impacted by the temporary closure of the Los Bronces plant starting mid-year. Additionally, copper production in Peru is expected to be weighted toward the latter half of the year due to temporary declines in copper grades during the initial months, ranging between 0.6%-0.7%.

Conversely, Anglo's diamond segment, notably represented by De Beers, experienced a 23% decline in output in the first quarter, reflecting cautious market conditions prompting production adjustments. Consequently, the company revised its annual production forecast downward to 26 million-29 million carats, down from the previously projected 29 million to 32 million carats. This adjustment coincides with a rise in anticipated average costs per carat to $90, up from $80, following a $1.6 billion writedown in February.

The decline in diamond prices persists due to surplus inventory, exacerbated by the competitive presence of lab-grown diamonds in the market. Economic uncertainty further influences conservative purchasing behaviours, contributing to a sluggish recovery in rough diamond demand projected for the remainder of the year.

BMO analyst Alexander Pearce remarked positively on Anglo American's initial performance in what is anticipated to be a challenging year for the company. However, the production of platinum-group metals experienced a 7% decline to 834,000 ounces, accompanied by a 30% drop in average realized prices, despite stable sales volumes.