Johannesburg - AngloGold Ashanti beat its guidance for gold production in the three months to June, ending the period having produced just more than a million ounces.
The listed miner had previously guided a range of between 960 000 ounces to a million ounces. It notes second-quarter production was lower year-on-year as it sold Navachab in June 2014, and also saw Obuasi's move to limited operations phase and continued safety-related interruptions in South Africa. “Whilst production from South Africa was lower year-on-year, the mines improved their performance from the first quarter with a 9% increase in production.”
The company adds it generated $71m of free cash flow in the second quarter and its production and costs beat guidance “on the back of another strong performance from its international mines and a recovery from its South African operations”.
AngloGold Ashanti has 20 gold mining operations in 10 countries, as well as several exploration programmes in both the established and new gold producing regions of the world. For the 2014 year, it produced 4.4 million ounces, generating $5.2 billion in gold income.
The world’s third-largest miner expects to produce between 3.8 million and 4.1 million ounces this year. This excludes its Cripple Creek & Victor mine in the United States, which it sold in June to Newmont Mining for $820 million.
AngloGold Ashanti, which has also been locked in wage negotiations with unions in SA, has trimmed its capital expenditure guidance between $900 million and $1 billion, a $100 million decline. Last year, it invested $1.2 billion.
The miner adds its production cost estimate assumes “neither labour related interruptions, power or other disruptions at our operating mines. Other unknown or unpredictable factors could also have material adverse effects on our future results”.
South African miners have been hard hit by power cuts as Eskom continues to implement loadshedding.
CEO Srinivasan Venkatakrishnan notes “cost management will continue to be a key driver for us...Whilst we've greatly the improved balance sheet following the sale of CC&V, this will not diminish our focus on improving free cash flow and returns through active portfolio management, capital discipline, and unrelenting focus on our operations."
AngloGold Ashanti responded to lower gold prices by cutting overhead expenditure by more than two-thirds since the end of 2012, and has lowered all-in sustaining costs more about a quarter over the same period.
The second quarter saw AngloGold Ashanti report adjusted earnings before interest, tax, depreciation and amortisation of $391 million, compared with $372 million in the second quarter of 2014, mainly due to a decrease in costs, which was only partially offset by a $97/oz, or 8% decline in the realised gold price.
Second-quarter adjusted headline earnings (AHE) were $26 million, or 6 US cents per share, compared with $35 million, or 9 US cents per share, the previous quarter.
Compared to the previous quarter, AHE was impacted by the 2% lower realised gold price and higher amortisation resulting from deferred stripping at Geita. Compared to the same quarter a year ago, the lower AHE was impacted by the 8% decline in the realised gold price and 8% reduction in ounces sold which is partially compensated by lower fuel prices and benefits of weaker local currencies, the miner said.
It also introduced two new, low-cost mines, sold or closed higher-cost assets and removed unprofitable ounces from its portfolio.
It says, in the quarter, standout performances were delivered by the Geita and the South American mines in Brazil and Argentina, while the contribution from Tropicana and Kibali reflected their full ramp-up.
Work continues on a brownfield project options to extend life, improve production or enhance efficiencies, at the Geita, Serra Grande, Siguiri and Sunrise Dam mines.
IOL