Anglo shares fall as results dismay

Anglo American tumbled as much as 8.26% on the JSE on Thursday following news that production across most commodities had declined in the March quarter year on year.

Johannesburg - Global diversified mining group Anglo American tumbled as much as 8.26 percent on the JSE yesterday before recovering following news that production across most commodities had declined in the March quarter year on year, as well as criticism of its chief executive’s salary.

The shares declined 6.78 percent to close at R152.41.

Read: Anglo America's production dips

The group is planning to cut 50 percent of its portfolio to transform into a producer focused solely on platinum, diamonds and copper, as it grapples with the sharp decline in global commodity prices that have resulted in a reduction of its share price, constrained balance sheet, sale and closure of non-core assets.

Up in arms

Reuters reported that investor advisory groups such as ShareSoc and Institutional Shareholder Services were also up in arms at Anglo chief executive Mark Cutifani’s pay package – $4.88 million (R69.60m) in 2015 – which they said was too high.

The criticism of Cutifani’s salary illustrated increasing pressure on bosses over high pay. “Given what the stock has done over the past couple of years, it (Cutifani’s salary) seems a bit high,” Nik Stanojevic, an equity analyst at Brewin Dolphin, said.

The company said yesterday that it had retained its full-year production guidance.

It said its Kumba Iron Ore operation posted disappointing numbers, with a 27 percent drop in production year on year to 8.9 million tons, driven by a 34 percent decline at the Sishen mine in the Northern Cape, where production was 5.8 million tons, while output from the Brazilian Minas-Rio project rose to 3.3 million tons as the operations ramped-up.

De Beers posted a 10 percent decline to 6.9 million carats as it tightened output, and the value of rough diamond sales for global sight holder sales and auction sales for the third sales cycle of 2016 improved to $660m, compared with the $617m value of the second sales cycle of 2016 was positive.

Better position

Anglo American Platinum (Amplats), which had been battered by strikes and sold its ailing Rustenburg operations to Sibanye Gold, managed to stabilise its operations and was in a better position with a 4 percent boost to 567 000 ounces in the March quarter.

Cutifani said the production numbers reflected the major restructuring programme under the company’s ongoing efficiency and cost cutting strategy.

“They also demonstrate the market discipline we continue to show in our key markets, particularly diamonds and platinum, and are consistent with our restructuring plans as we focus on lower cost and higher margin assets,” Cutifani said.

Kumba, which has issued section 189 guidance for the full year, remained unchanged at 27 million tons of production. The company aid the section 189 process at Kumba was on track, with consultations on the organisational structures completed.

Production from Amplats’ retained mines rose by 18 percent compared with the prior period, the company said.

Its Amandelbult operation spiked 33 percent to 111 000 ounces due to improved mining efficiencies. Production at Mogalakwena increased 7 percent to 109 000 ounces due to higher grade and improved concentrator throughput.

The company said its Union mine had a solid performance during the quarter, maintaining production at 34 000 ounces.

Abdul Davids, the head of research at Kagiso Asset Management, said Anglo’s production report was a mixed bag with diamond production lower, but in line with the group strategy and Kumba production lower as well.

* With additional reporting by Reuters

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