Anglo American ups copper guidance on Quellaveco start

Anglo American (LSE: AAL) says it expects to churn out between 680,000 and 760,000 tonnes of copper in 2022, as its giant Quellaveco mine in Peru is slated to begin producing copper concentrate in the middle of the year.

The company, which saw copper output drop during the fourth quarter last year, ended 2021 with total copper output of 647,000 tonnes, in line with 2020 figures, despite ongoing water challenges from the severe drought conditions, mainly in Chile.

First ore at the Quellaveco mine, located in the Moquegua region of Peru, was mined in October 2021, Anglo American said. The company expects the asset to generate between 120,000 and 160,000 tonnes of copper this year, and 300,000 tonnes per year for the first ten years at full production.

Chief executive officer Mark Cutifani highlighted the increase in copper production achieved at the Collahuasi mine in Chile, saying it was a result of “strong plant performance and planned maintenance.”

The mine, the world’s second largest copper mine in which Anglo American has a 44% interest, produced 277,200 tonnes of copper last year, compared to 276,900 tonnes in 2020. The most important output increase was registered in the fourth quarter of 2021, as Collahuasi produced 66,000 tonnes of copper, 11% more than in the same period of 2020.

The production results helped offset an 11% decrease in production at the company’s Los Bronces mine in Chile in the last quarter of 2021 to 84,900 tonnes of copper.

Copper accounts for nearly 20% of Anglo American’s annual revenue.

While copper projects are in the pipeline, producers are wary of repeating oversupply mistakes of past cycles by speeding up plans at a time when mines are getting a lot trickier and pricier to build — one reason why copper prices have traded around decade highs, reaching US$9,929 a tonne in London on January 26.

Click here for an interactive chart of copper prices.

The copper industry needs to spend upwards of US$100 billion to close what could be an annual supply deficit of 4.7 million metric tonnes by 2030, according to estimates from CRU Group. The potential shortfall could reach 10 million tonnes if no mines are built, commodities trader Trafigura has said.

BMO Capital Markets has warned that current copper prices are too elevated relative to fundamentals, but the metal remains its top pick in the longer term due to “its perennially disappointing supply side and strategic role in global decarbonization.”