A gem of a year for Namdeb

Jo-Maré Duddy



Namdeb Holdings last year produced 2.008 million carats of diamonds, 203 000 carats of nearly 11.3% more than 2017.

Anglo American yesterday released its latest financial year results, which show Namdeb Holdings in 2018 contributed around 5.7% to De Beers' total production of nearly 35.3 million carats. In 2017, Namdeb Holding's share of the diamond giant's total production of about 33.5 million carats was 5.4%.

Anglo American, dual-listed on the Namibian Stock Exchange (NSX), owns De Beers, which in turn owns half of Namdeb Holdings. The remaining 50% belongs to the Namibian government.

The bulk of Namdeb Holdings' 2018 production came from marine operations which increased by 4% compared to the previous year. Anglo said higher production was “driven by fewer in-port days for the Mafuta crawler vessel and the adoption of a technology-led approach for optimising the performance of the drill fleet”.

Namdeb Holdings' land operations delivered 600 000 carats, up 34% from 2017. This was the result of access to consistently higher grades, despite placing Elizabeth Bay onto care and maintenance in December, Anglo said.

Diamonds from Namdeb Holdings fetched a price of US$550 per carat last year, about 2% more than 2017. This is the highest price in the De Beers group – diamonds from Botswana (Debswana) were priced at US$155 per carat, while those from Canada (Gahcho Kué) and South Africa (De Beers Consolidated Mines) fetched US$144 and US$109 per carat respectively.

Namdeb Holdings' unit cost, however, was also the highest. For 2018, the unit cost was US$274 per carat, an annual increase of 6.6%. De Beers' unit cost last year increased by 5% to US$60 per carat.



Profitability

As in 2017, Namdeb Holdings reported an underlying EBITDA (earnings before interest, tax, depreciation and amortisation) of US$176 million – about N$2.5 billion at yesterday's exchange rate.

The company's underlying EBIT (earnings before interest and taxes) dropped by about 4% to US$140 million.

Namdeb Holdings' capital expenditure last year was US$38 million, more than N$520 million. In 2017 it was US$33 million.

De Beers' reported an underlying EBITDA of nearly US$1.3 billion, about 13% less than 2017.



Anglo

According to Reuters Anglo American reported on better than expected core earnings, driven by higher copper and coal prices, but said no financial performance was “worth a life” and its biggest challenge was eliminating danger at its mines.

The mining industry is under scrutiny following the collapse of a dam operated by Vale in Brazil in January, which has rocked confidence in the sector just when balance sheets had been repaired after the commodities crash of 2015/16.

Of the major companies, Anglo American was one of the worst hit by the commodity market slump and has made the strongest recovery.

Its shares have risen around 14% this year and were trading down 0.5% by 1030 GMT yesterday as some analysts said the payout to shareholders of US$0.51 a share was low. Other major miners have announced buybacks to keep investors on side.

Anglo American's underlying 2018 EBITDA of US$9.16 billion was up 4% from US$8.82 billion a year earlier and beat analysts' average estimate of US$8.7 billion, according to Refinitiv IBES data.

As investors focus on sustainability, CEO Mark Cutifani said Anglo American was an industry leader and backed calls from BHP earlier this week for an independent body to oversee the tailings dams that store increasingly high volumes of waste generated by mining.

He said Anglo American's accident rate was at a record low as the rate of recordable incidents had fallen to 2.66 injuries per million hours worked. The goal, however, is zero harm.

“No degree of financial performance is worth a life,” Cutifani said in a statement. “Our determination to reach and sustain zero harm is our most pressing challenge.”

“I think we're on the right journey, but we need to get there quicker,” he added on a call with journalists.



Brazil appeals

In 2018, five Anglo American workers died in safety incidents. The company has also suspended operations at a coal mine in Australia after one worker died and several were injured on Wednesday.

Cutifani said yesterdayday investigations continued into the cause, which he said may have been “related to health issues”.

Anglo American's profitability was driven by higher prices for some of its commodities, notably copper and coal, and efficiency improvements.

Copper is particularly in demand for electrification and some of Anglo American's share price gains have resulted from its copper projects in Latin America.

It is developing a mine in Peru and is exploring in Brazil, where Cutifani said Anglo was assessing drilling results that have struck copper.

Asked whether the Vale dam disaster would make it harder for miners to operate in Brazil, Cutifani said tailings legislation would be tightened but Brazil should still be attractive.

“We don't expect the changes to be such that we change our view on Brazil,” he said.

On the possibility of buybacks, Stephen Pearce, Anglo's finance director, said he was open to considering them “at the right time”.

Analysts said Anglo's final dividend of US$0.51 per share was not a generous payout compared to its rivals.

“As a shareholder you'd be forgiven for asking when you were going to see the benefits of the turnaround Mark Cutifani has manufactured at the mining giant,” Nicholas Hyett, equity analyst at Hargreaves Lansdown, said in a note.

– Additional reporting by Nampa/Reuters