Global diversified miner Anglo American is focusing on improving its cost performance and cash generation by reconfiguring several assets to adjust the production profile to near-term constraints and market conditions, CE Duncan Wanblad outlined during an investor update call on December 8.

The group is targeting cost savings of about $500-million by mid-2024, with Wanblad saying this programme is well advanced.

Moreover, it is targeting a $1.8-billion decrease in capital expenditure by 2026.

Wanblad said the group was taking deliberate and decisive actions to enhance returns, in light of global economic weaknesses, especially affecting consumer-focused diamonds and platinum group metals (PGMs), with costs impacted on by strong and prolonged inflationary pressure.

PRODUCTION REDUCTION

Wanblad pointed out that group company Kumba Iron Ore would be reducing its production guidance for 2024 owing to prolonged logistics constraints, with South Africa’s well-documented port and rail challenges having led to increased stockpile levels and also impacting on revenue.

He said that while the government was addressing the logistics constraints, it was a long-term approach, and in the interim, the group would be taking other measures including reconfiguring the business and revising the mine plan.

The adjusted production would enable structural cost and capital expenditure (capex) reduction to protect margins. The group is looking to rebalance the value chain and reduce year-end product stockpiles by about two-million tonnes.

Kumba will also be undertaking a multi-year cost optimisation journey.

Wanblad further announced that Anglo would also focus on higher-margin own-production through its PGMs processing facilities in South Africa and moving to one plant at the Los Bronces copper operation, in Chile.

A focused investment at the Mogalakwena openpit PGMs mine in South Africa would be undertaken at the appropriate time, Wanblad averred.

As a result of such initiatives, Wanblad informed that the group expected to deliver lower unit costs in 2024, despite high inflation, and a $1.8-billion decrease in capex in the 2023 to 2026 period, as targeted.

“We are building a platform for strengthened and sustainable operational and financial performance. We took early action in 2023 to increase business resilience in the face of ongoing economic and geopolitical volatility and the current cyclical weakness in PGMs and diamonds.

“As a result, we have already gone a long way towards reducing our business support costs by $500-million by mid-2024, with an additional $500-million in annual cost efficiencies identified across our global businesses that we expect to deliver in 2024,” Wanblad said.

In 2024, group-wide production is expected to decrease by about 4%, as production has been rescheduled to enhance value and reduce unit costs.

Unit costs are expected to decrease by about 2%, with cost discipline expected to more than offset inflation.

Capex will be about $5.7-billion – about $800-million less than initially planned – and includes expenditure on the Woodsmith project, a polyhalite fertiliser mine being developed in the North East of England.

In 2025, production is expected to decrease by a further 3%, with production changes aimed at enhancing value and reducing unit costs, as well as scheduled maintenance.

Capex is again guided at $5.7-billion – a reduction of about $400-million compared with initial estimates.

In 2026, production is expected to increase by about 4%, benefiting from higher volumes in copper, iron-ore, steelmaking coal and diamonds.

Capex will be about $5.3-billion.

“Looking ahead, the fundamental supply and demand picture for many metals and minerals is ever more attractive. Many of the world’s major economies are focusing their resources on meeting global decarbonisation timelines and, as the global population grows, continues to urbanise and demands higher living standards, we expect unprecedented demand for responsibly produced raw materials.

“We are improving our resilience and ensuring we are set up to grow the value of our business into the major demand trends, drawing on the bench of well-sequenced, margin-enhancing project options within Anglo American,” Wanblad said.