South Africa’s Covid-19 necessitated lockdown had a negative impact on diversified miner Anglo American’s volumes in its first half, weakening profitability in the process.

The group reported that earnings before interest, taxes, depreciation, and amortization (EBITDA) was down $1.1 billion during the six months period.

“The volume impact of Covid-19 related disruption to production and the supply chain and the impact of reduced diamond demand decreased underlying EBITDA by $1.1 billion.

“Across southern Africa, operational disruptions as a result of the Covid-19 pandemic were primarily due to the implementation of a national lockdown by the South African government from 26 March and the Botswana government taking similar action from 2 April,” said Anglo American.

“These restrictions affected PGMs, Kumba, De Beers and Thermal Coal significantly throughout the second quarter.

“Since the imposition of the restrictions, however, the Group’s operations have built up production levels from around 60% of total capacity in April, to approximately 90% by the end of June.”

The Group also reported that the Covid-19 outbreak has had a major impact on the diamond market, affecting all stages of the diamond supply chain and resulting in a 45% decrease in rough diamond sales volumes at De Beers.

To the extent of the impact, Anglo American’s profit attributable to equity shareholders decreased by 75% to $0.5 billion (30 June 2019: $1.9 billion). Underlying earnings were $0.9 billion (30 June 2019: $2.0 billion).

From an operational perspective, performance of the Group’s portfolio was largely suppressed.

“Continued strong performances from our Minas-Rio iron ore operation in Brazil and the Collahuasi copper operation in Chile helped mitigate our overall decrease in production to 11% on a copper equivalent basis.

“The Covid-19 lockdowns across southern Africa affected production at PGMs, De Beers, Kumba and Thermal Coal, with production also affected by operational issues at Metallurgical Coal and PGMs.

“Ramping up from a production level of around 60% of capacity in April, operations across the Group continued to increase to around 90% of production capacity by the end of June.”

Commenting on the results, Mark Cutifani said:

“The first half of 2020 has tested society to its limits and I am encouraged by – and proud of – how our people have pulled together to do what’s right for each other, our business and for society as a whole.

“Anglo American acted quickly at the onset of the pandemic to protect both the health of our people and host communities through our global “WeCare” lives and livelihoods programme. At the same time, we secured the continuity and integrity of our operations.

“The pandemic did materially impact production, with varying degrees of lockdown being the main driver for our 11% overall reduction in output and 16% decrease in revenue, alongside operational incidents at PGMs and Met Coal.

“These reductions were partially offset by strong performances from our Brazilian iron ore and Chilean copper operations. By the end of June, we were back at circa 90% capacity across the portfolio and the significant transformation of our underlying operational capabilities that has made the business more resilient helped to deliver $3.4 billion of underlying EBITDA.”