Tough first quarter for Namdeb

Jo-Maré Duddy – Namdeb Holdings’ production in the past quarter was 45 000 carats less than a year ago, driven mainly the land operation transitioning Elizabeth Bay to care and maintenance.

Land operations produced 119 000 carats, a drop of 27% compared to the first quarter of 2018, according to production results released by Anglo American yesterday. Debmarine Namibia delivered 364 000 carats, 0.3% down on an annual basis. Combined production totalled 483 000 carats, 9% lower than the same quarter last year.

Diamond mining is expected to grow by -12.5% this year, the Bank of Namibia (BoN) forecast in its latest Economic Outlook released earlier this month. This follows positive growth of 13.7% and 12% in 2018 and 2017 respectively.

Should the BoN forecast prove to be spot-on, 2019 will record the worst contraction in diamond mining since 2009. The central bank expects the sector to grow by 5% next year.

According to the BoN forecast, diamond mining is expected to contribute nearly N$17.4 billion at current prices to Namibia’s forecast gross domestic product (GDP) of about N$202.8 billion. Last year, the sector’s contribution was about N$18.2 billion.

Anglo

Anglo American owns De Beers, who has 50% of the shares in Namdeb Holdings. The Namibian government owns the rest.

De Beers’ overall production in the past quarter decreased by 8% to 7.9 million carats on an annual basis, driven by lower production at Venetia in South Africa as it transitions from open pit to underground.

Anglo American Plc is listed on the Overall Index of the Namibian Stock Exchange (NSX) and closed Wednesday at N$387.95 per share.

Anglo American said yesterday technical problems dragged first-quarter production down 6%, but copper output rose, as did that of iron ore from its Minas-Rio mine in Brazil, which ramped up operations after a leak last year, Reuters reported.

The share price fell 1% by 0908 GMT. The stock extended losses from the prior session, when JPMorgan warned of a US$900 million cut to 2020 core profit if Minas-Rio failed to obtain a Brazilian tailings permit by the end of the year.

Brazilian authorities have increased scrutiny following the Vale dam disaster in January.

JPMorgan downgraded the stock to "neutral" from "overweight", saying the share no longer looked cheap. It has gained nearly 20% this year, outperforming some peers.

Copper

Anglo American's strength has been driven by increased productivity and a promising outlook for copper as the mineral is in demand for an anticipated upsurge in electrification.

Anglo's copper output climbed 4% to 161 100 tonnes for the three months ended March 31, the miner said. Minas-Rio iron ore production jumped 61%, following a faster-than-expected ramp-up.

Anglo American in December restarted operations at Minas-Rio, after getting regulatory approval to step up production. At the same time, it increased production targets for 2019, but it still needs another permit.

Chief executive Mark Cutifani yesterday said the fall in total output had been offset by a strong performance in copper.

"By the end of the quarter we had increased our production run-rate, are on track to deliver this year's production targets and our guidance is unchanged," Cutifani said in a statement.

Many analysts broadly agreed. Edward Sterck of BMO Capital Markets maintained his "outperform" rating, saying Anglo American remained his top pick among diversified miners. – Additional reporting by Nampa/Reuters