Sluggish luxury sales give Anglo American a diamond conundrum

A fall in luxury spending could push Anglo American to cut its diamond production further this year, complicating plans for a sale or stock market flotation of the trophy business.
Anglo American said the recovery of the diamond market was expected to be “protracted”, with depressed demand from China and higher stockpiles being held by processing companies raising the possibility of another reduction in diamond production.
“As a result, and together with our partners, we will continue to assess the options to reduce production going forward,” Duncan Wanblad, Anglo’s chief executive, said.
Rough diamond output declined by 25 per cent during the third quarter to 5.6 million carats, taking total production since the start of the year to 18.9 million carats, 21 per cent lower than a year earlier.
The FTSE 100 miner is in the middle of a radical restructuring in which it will either sell or demerge its platinum and steelmaking coal operations as well as De Beers, its diamond business, leaving a company focused on copper and iron ore by the end of next year. The proposal was set out in May as part of the defence against a £39 billion takeover bid from BHP, the world’s largest mining company.
The break-up of the 107-year-old group is on track, it said, with the sale of its Australian coal arm expected to be announced within the coming months. Final-round bids are being assessed. The sales process was disrupted by a fire at the Grosvenor mine during the summer, which would no doubt impact the price received, Wanblad has said.
Alongside a weaker performance from De Beers, the prized copper division also disappointed in the third quarter, with output falling 13 per cent 181,000 tonnes, after maintenance work caused volumes to fall at the Los Bronces mine in Chile and Quellaveco in Peru suffered from lower recoveries and grades. Average realised prices for copper, a metal seen as key to the energy transition, were 9 per cent higher during the September quarter at $4.21 per pound.
However, guidance for refined production from the platinum business, Amplats, was raised to between 3.7 million and 3.9 million ounces this year, up from 3.3 to 3.7 million ounces, as the platinum group metals market showed signs of stability. Alongside De Beers, Amplats has been one of the weakest spots for Anglo as prices for platinum metals, used in catalytic converters, have suffered as car production levels have faltered.
The spinout of the business, which is already listed in Johannesburg, is due to be completed by the middle of next year, the company said.
Iron ore output was also stronger than analyst expectations, rising to 15.7 million tonnes from 15.4 million tonnes a year earlier.
The shares closed up 67p, or 2.9 per cent, at £23.91.