Diamonds drive Anglo American output rise, copper flat

* Copper production flat, diamond output up 22 percent

* Anglo CEO cites productivity gains for rise

* Copper-focused Kaz Minerals (LSE: KAZ.L - news) says output rose by 80 pct (Adds context, analyst reaction, share price)

By Barbara Lewis and Peter Hobson

LONDON, Jan 25 (Reuters) - Anglo American (LSE: AAL.L - news) beat expectations on Thursday with a 5 percent increase in production in 2017, driven by increases in diamond and iron ore output, while base metal copper stagnated.

Many miners have struggled to maintain output as ore bodies have aged and exploration budgets collapsed as a result of the commodity markets downturn of 2015-16.

Copper is particularly in demand because of its use for both old and new technology, such as electric vehicles.

Anglo's Platinum and palladium, iron ore and coking coal output fell between 4 and 8 percent in the fourth quarter and were flat or higher for the full year.

But the ramp-up of its Gahcho Kue mine in Canada increased Anglo's diamond production by 22 percent.

Anglo Chief Executive Mark Cutifani said in a statement the rise in overall output "was achieved despite the removal of unprofitable and higher cost platinum and metallurgical coal".

BMO Capital Markets in a note said the results were solid and it expected the company to continue focusing on incremental improvements to drive productivity.

South Africa, Anglo's central focus, has had particular issues with efficiency at deep, old mines and platinum prices have suffered from falling demand because of the shift away from diesel cars, which use the metal to reduce emissions.

Anglo mothballed its Bokoni mine, which contributed to a 4 percent fall in platinum output in the last quarter.

Platinum prices peaked at above $2,000 an ounce a decade ago and hit 7-year lows at the start of 2016. Since then they have recovered by around 25 percent.

Productivity improvements boosted iron ore output at South Africa's Kumba by 8 percent for the full year, but in Brazil, where annual output fell 4 percent, Anglo is still negotiating for a licence to increase iron ore production.

The perception that copper is one of the most sought-after minerals has pushed prices more than 50 percent higher since the lows of late 2015/early 2016.

Kazakh-focused copper miner Kaz Minerals is among those bringing on new production and announced an 80 percent full-year increase in output to 259,000 tonnes.

Analysts said the results were below expectations following maintenance and the realisation some of its copper ore was lower grade than previously thought.

Kaz Minerals share price was down more than 3 percent by 0900 GMT, while Anglo American was trading around flat, in line with the broader index. (Additional reporting by Arathy S Nair in Bengaluru; editing by Jason Neely and Alexander Smith)