In a significant move, the world’s largest diamond mining company by value has announced further production cuts, adding to its already implemented plan to curtail output by 10 percent. This decision led to a 15 percent year-on-year decline in second-quarter production, dropping to 6.4 million carats, as reported in an update on Thursday.
The potential sale or listing of De Beers was a crucial component of Anglo’s broader strategy to fend off a £39 billion takeover bid from industry giant BHP earlier this year. However, the ongoing slump in the diamond market poses a challenge to achieving this goal by the end of 2025.
“Trading conditions became more challenging in the second quarter as Chinese consumer demand remained subdued,” stated Duncan Wanblad, Anglo’s chief executive.
High inventories for diamond traders and manufacturers, coupled with expectations of a slow recovery, have prompted the company to consider further production cuts. This strategy aims to manage working capital and preserve cash amid the tough market conditions.
The prospect of deeper production cuts comes as the company disclosed the impact of other setbacks in its second-quarter production update, which had been anticipated by analysts.
Anglo has downgraded its full-year guidance for metallurgical coal from 15-17 million tonnes to 14-15.5 million tonnes following a fire at its Grosvenor mine in Australia, which has been out of action for months. Costs for the coal business are also expected to rise significantly this year, estimated at $130 to $140 per tonne, up from $115 per tonne.
The company is prioritising the sale of its metallurgical coal division due to strong buyer interest, with plans to divest De Beers, its platinum unit, and nickel operations to follow.
Additionally, an impairment on the Woodsmith fertiliser mine in North Yorkshire, UK, is expected in the upcoming half-year results, as spending on the project is drastically cut back as part of the turnaround plan.
Despite these challenges, shares in Anglo rose by 2 percent in early trading in London on Thursday, buoyed by production results for most commodities exceeding consensus analyst forecasts. The company achieved record second-quarter iron ore production in Brazil and is on track to meet its guidance for the copper unit.
Wanblad reaffirmed his commitment to streamlining the company to focus on just copper, iron ore, and fertiliser within 18 months. “We are working at pace to execute on the asset divestments, including steelmaking coal,” he said. “Work is progressing with the aim of substantively completing this transformation by the end of 2025.”
Source: DCLA
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