Copper

Anglo American Copper Output Falls 5%

Anglo keeps annual copper guidance and lowers expected unit costs. For Teck holders, a recovery in mine output joins the Chinese approval test.

by Dominic Rhee2 min read

Snow covers the benches of a Chilean open-pit copper mine beneath a single work lamp.
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Anglo American's copper production fell 5% from a year earlier to 174,900 tonnes, according to its October 20 production update. The report covers the quarter ended September 30, 2026. The miner attributed the decline primarily to extreme weather in Chile and processing lower-grade stockpile ore at Collahuasi, while retaining its annual production forecast.

How much recovery does that forecast require? Anglo kept its full-year copper guidance at 700,000 to 760,000 tonnes, with better ore grades expected in the fourth quarter. Its October 20 report rounds production through September to 519,000 tonnes. Using that rounded total, we calculate that about 181,000 tonnes are needed in the final quarter to reach the bottom of the range. For you assessing copper supply, this quarter's decline therefore comes with an unchanged annual forecast that still requires a recovery. Management also says Chilean production guidance remains subject to water availability.

There is support for earnings in the same report: Anglo lowered expected full-year copper unit costs to about US$1.39 per pound from US$1.45. It attributed the improvement in Peru to strong by-product credits and cost performance. Those credits reflect value from other metals produced alongside copper, so the benefit depends partly on their prices. The cost measure excludes royalties and depreciation and includes only direct support costs. As we argued in Copper Prices Rise Amid Rate Optimism, volumes and costs determine how much copper-price strength reaches your shares. Lower guidance gives us a more favourable cost assumption, while actual shipments and spending will determine the return.

For those of us holding Teck, NYSE: TECK, Anglo's mine performance is also part of the assets we would own if the merger completes. Teck's June 30 announcement says each Teck share will be exchanged for 1.3301 Anglo shares, with an exchangeable-share election available to eligible Canadian holders. A share exchange ties the consideration to the combined business, so Anglo's operating recovery belongs alongside the approval process in your assessment. Today's production update gives us fresh operating assumptions; it supplies no combined earnings result or quantified change in merger value.

Anglo says Chinese antitrust approval is the final outstanding regulatory milestone and still expects completion by March 2027. That remains management's expectation, and its release reports no Chinese decision. We would weigh the improved cost outlook alongside the production recovery still required, while keeping completion conditional. Teck's own forthcoming results will let us assess its operations separately from today's Anglo figures before treating the proposed combination as a stronger copper investment.

We will check Teck's volumes, costs and any merger update when it reports before market open on October 29, as announced October 6.

Seek the truth and be prepared,

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Disclaimer: This letter is for informational and educational purposes only and does not constitute investment advice. Past predictions and performance are not indicative of future results. Please see our full terms of use and disclaimer at equedia.com.

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