Diamonds unaffected by Covid-19 resurgence, but Anglo stops short of calling sustained recovery

ANGLO American reported an improvement in production in the second half of 2020 with operations at 95% of 2019 rates.

Recovery was the main feature of its fourth quarter production report today. Diamond demand was returning – although the group stopped short of declaring an outright sustained up-trend – whilst Anglo American Platinum (Amplats) completed the rebuild of its Anglo Converter Plant A (ACP A) processing unit following an explosion in February last year that wiped out its refining capacity.

“The recovery was all the more credible given planned maintenance at both the Collahuasi copper and Kumba iron ore operations and the suspension of operations at the Grosvenor metallurgical coal mine (owing to a safety incident),” said Mark Cutifani, CEO of Anglo.

Heavy rainfall in South Africa, and some operational problems, forced down Kumba Iron Ore production 18% in the fourth quarter. Export sales were only 1% lower, however, as production was supplemented by about one million tons of stock. The rainfall had continued into the current quarter, the group said.

Encouragingly for Kumba Iron Ore’s bottom line, however, the full-year average realised price for its grade of iron ore – of $115 per ton – was higher than the benchmark price for iron ore of $97/t.

Diamond production fell 14% year-on-year in the quarter to 6.7 million carats owing to planned reductions in response to lower demand which had been affected by Covid-19 disease. There were also operational challenges at Orapa in Botswana, it said.

But the market for diamonds was finally showing signs of authentic recovery. “As we begin 2021, we are continuing to see positive demand for rough diamonds, supported by consumer demand for diamond jewellery in the holiday selling season.

“While it is still too early to signal a strong and sustained recovery, the resilience in demand in spite of ongoing Covid-19 impacts is still very encouraging,” Cutifani said.

De Beers said there had been good results from the last two sights of 2020 with sales totalling 6.9 million carats – about flat year-on-year – compared with 6.6 million carats from three sights in the third quarter. “Encouraging” demand from the US continued into the holiday season and there was also good demand in China, the group said.

Diamond production guidance for 2021 has been adjusted to between 32 to 34 million carats compared to guidance of 33 to 35 million carats previously.

“Overall, we view the results as in line,” said Goldman Sachs in a report. “The company saw solid quarter-on-quarter production growth (copper, iron ore, nickel) with all meeting/topping full year guidance,” it added.

Copper production in the quarter was 6% higher as Los Bronces secured access to industrial water for processing and Collahuasi delivered record production for the 12-month period, offsetting planned maintenance in the quarter.

Anglo also flagged a $200m non-cash rehabilitation provision at its copper assets.