Anglo American’s coal output down by 19% on year, trims thermal coal guidance

South African miner, Anglo American has reported a drop of 19% y-o-y in its coal production for Q3 CY20 at 10.4 mn t against 12.9 mn t in Q3 CY19.

Metallurgical coal

• Production fell by 25% y-o-y to 4.8 mn t in Q3 CY20 against 6.6 mn t in the same quarter last year.
• The drop is being attributed to the suspension of operations at Grosvenor following the underground gas ignition incident in May 2020.
• However, open cut operations have been scaled back at Dawson and Capcoal in response to Covid-19 reduced demand for lower quality metallurgical coal.
• The year to date average realised price for hard coking coal was $114/tonne, which was lower than the benchmark price of $129/t due to a lower volume of premium quality hard coking coal produced from Moranbah and Grosvenor.
• The ratio of hard coking coal production to PCI/semi-soft coking coal was 82:18, lower than in Q3 2019 (85:15), due to a lower proportion of product coming from the underground operations.

Thermal coal (South Africa)

• Export thermal coal production increased by 7% to 4.6 mn t majorly driven by the ramp up of the Navigation lifex section at Khwezela.
• While all mines operated at 50% at the start of lockdown in late March, with open pit operations being ramped up to 70% as lockdown measures were eased in May.
• During June-July, all mines operated at 80% with safety measures being undertaken by the company.
• Whereas since August, all mines have been operating at about 90% production due to the impact of Covid-19 measures to safeguard the workforce.
• Covid-19 measures in the logistics chain have affected the loading of volumes onto trains resulting in higher stockpiles at operations.

Thermal coal (Colombia)

Attributable export thermal coal production decreased by 50% to 1 mn t as a result of an ongoing strike at Cerrejón, which started in September. This more than offset the ramp up in production earlier in Q3 following the lifting of lockdown restrictions.

Price:

The year to date weighted average realised price for export thermal coal from South Africa and Colombia was $53/t (South Africa was $56/tonne and Colombia was $45/tonne).
This was 10% lower than the weighted average quoted FOB price from South Africa and Colombia due to timing differences and quality discounts relative to the industry benchmark.

Revision in full-year guidance
Production guidance for metallurgical coal is maintained at 16-18 mn t.

Production guidance for export thermal coal is revised to 19 mn t (previously 21 mn t), owing to the ongoing strike disruption in Colombia, subject to the extent of further Covid-19 related disruption.