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Anglo American share price: production update and trading view

In this article we breakdown the Anglo American plc’s operational update as well as a trading view on the company’s various listings.

Anglo American production update

Anglo American has released a production update for the third quarter (Q3) of the 2021 financial year (FY21), highlighting that total output for the group increase by 3% year-on-year (YoY), led by a strong performance in the copper and platinum divisions, while coal was the primary negative contributor to the final figure.

Kumba iron ore production offsets Minas-Rio output decrease

Iron ore production from Kumba saw a 10% YoY increase due to prompt maintenance work allowing for increased plant availability. Anglo American’s Minas-Rio joint venture, however, saw unplanned maintenance equate to a 13% YoY decrease in production. Total production of iron ore increased by 1% YoY. Iron ore is the group’s largest contributor to group earnings. Average realised prices for iron ore were around 59% (in USD terms) higher in first quarter (Q1 2021) than in FY20.

Refined platinum production surges

A lesser impact from Covid-19 than in the prior year’s comparative quarter has seen own-mined production of platinum increase by 6% YoY. Refined production of the metal increased by 59% following increased refinery capacity since November last year. Platinum is the second largest contributor to group revenue and full-year guidance remains unchanged. The average realised basket price for platinum group metals (in USD terms) was 9% higher in Q1 2021 than in FY20.

Copper leads production gains

Copper production for Anglo American increased by 9% YoY driven primarily by strong operational performance at both the group’s Los Bronces and Collahuasi operations. Guidance for the full year remains unchanged. Copper is the third largest contributor to group revenue and realised prices for the metal in Q1 2021 were 40.8% higher than those realised in FY20.

Diamond production declines but full-year guidance remains unchanged

Excessive rainfall in Southern Africa, combined with Covid-19-induced shutdowns in Canada and scheduled maintenance in Namibia, has equated to a 7% decline in rough diamond production for the quarter. Demand for diamonds has, however, seen an increase to pre-Covid-19 levels. Full-year production guidance remains unchanged.

Coal production slows ahead of proposed demerger

Thermal coal production declined by 25% (YoY) in the group’s South African operations and by 9% in its Colombian operations. Production in South Africa was impacted negatively by the second wave of Covid-19 infections, with full capacity yet to be realised since being affected in the quarter. Production guidance for thermal coal has been lowered by more than 40% on the back of the proposed demerger of the South African assets, which awaits shareholder approval on the 4 June 2021.

Metallurgical coal production has declined 9% YoY for the quarter, with full-year guidance significantly lowered.

Nickel and manganese

Nickel production fell 7% for the quarter due to lower grade ores, while manganese production increased by 7% over the period. Full-year production guidance for these base metals remains unchanged.

The long-term trend for Anglo American remains up, although in the short-term the price looks to be reversing off channel resistance from overbought territory. Trend followers might hope for a short-term pullback towards the confluence of both trendline and gap support at the 29.00 level, before looking for long entry. In this scenario, channel resistance at 33.65 would provide the longer term upside target, while a move to close below the 26.80 level would instead warn that the uptrend is now broken.

Anglo American (AGL)

Similarly to the UK listing (AAL), the long-term trend for Anglo American’s Johannesburg Stock Exchange (JSE) listing remains up, although in the short-term the price looks to be reversing off channel resistance from overbought territory. Trend followers might hope for a short-term pullback towards the confluence of both trendline and gap support at the 57500 level, before looking for long entry. In this scenario, channel resistance at 689 would provide the longer term upside target, while a move to close below the 543 level would instead warn that the uptrend is now broken.

In summary

  • Total production for Anglo American increased by 3%
  • Kumba iron ore’s production increase offset Mina-Rio’s output decrease
  • Diamond production has declined although full-year guidance remains unchanged
  • Coal production slowed ahead of a proposed demerger
  • Refined platinum production has increased significantly
  • Copper production leads for Anglo American
  • Long-term price trend for Anglos American remains up, although the share price is overbought in the near term

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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