Canadian group downgrades outlook just weeks after deal with London-listed rival was announced
Anglo American has defended the due diligence on its $50bn merger with Teck Resources after the Canadian company slashed production forecasts at two large copper mines.
The Vancouver-based miner said on Wednesday that its flagship Quebrada Blanca facility in Chile would produce 170,000-190,000 tonnes of copper this year, down from a previous guidance of up to 230,000 tonnes, and cut forecasts for the site up to 2028.
This is the second cut to guidance at the giant copper asset this year, after an earlier downgrade related to waste disposal issues.
Quebrada Blanca was seen as a key reason for the merger with Anglo announced last month, as it is only a short distance from the London-listed company’s Collahuasi mine.
Executives and analysts have long considered the potential of combining the two assets, though Quebrada Blanca has been hit by repeated setbacks that have hit Teck’s share price over the past 12 months.
Anglo said on Wednesday that the outlook presented by Teck was “broadly consistent” with the “significant due diligence” it carried out prior to agreeing the merger, plans for which remained unchanged.
“While the specific outcome of the operational review that Teck has announced today was not known at the time, the outcome presented by Teck is broadly consistent with Anglo American’s independent due diligence and analysis,” it said in a statement.
The guidance cuts come as copper prices approach fresh highs following a series of deadly incidents that analysts say will constrain global supplies of the metal, which is essential to industries from technology to energy.
The London benchmark copper price has soared to almost $10,800 a tonne in response to a run of disasters, including a fatal mudslide at US miner Freeport-McMoRan’s Grasberg copper and gold mine in Indonesia.
Freeport said this week that it had found the bodies of five people who had been missing at the site, bringing the death toll to seven.
Berenberg on Wednesday cited “resilient demand and ongoing supply issues” as it raised its copper forecast by 12 per cent to $10,875 per tonne.
It also said that Teck’s latest cuts to guidance had been “expected by the market” and that the disruptions were due to “short-term issues”.
Anglo American shares were up 1 per cent at £28.40.
Source: www.ft.com
Aleksei Andrievskii is the founder of the ANDRIEVSKII SEA WEALTH family office in Cyprus, a member of the advisory board at Bendura Bank AG, Liechtenstein