Johannesburg -
AngloGold Ashanti will begin extracting gold using reef-boring technology in the first quarter of next year as the third-biggest producer of the metal seeks to halt a “terminal decline” of the local industry.
AngloGold aimed to derive 10 percent to 20 percent of its South African gold using the technique within the next five years, chief executive Srinivasan Venkatakrishnan said on Wednesday.
The Johannesburg-based company had produced 35kg of gold using the new machines in testing at its TauTona mine, he said.
“This is a game changer, or a paradigm shift,” said Venkatakrishnan, who became chief executive in May. “If we do nothing, the gold industry is in terminal decline.”
After more than a century as the world’s biggest gold producer, South Africa has now slumped to sixth position. Production fell by a third to 167 236kg in the five years to 2012, according to the Chamber of Mines, the industry lobby group. China, Australia, the US, Russia and Peru have all overtaken the country.
The boring machines, which AngloGold has developed with its suppliers, are able to remove just the gold-bearing ore from the reef, replacing it with cement and chemicals that stabilise the mining structure.
That meant the company would have to treat less rock and could operate 24 hours a day, Venkatakrishnan said.
“This opens up areas that we cannot otherwise mine,” he said. “It also opens up areas which we have left behind for infrastructure support.”
AngloGold rose the most in two weeks in Johannesburg trading on Wednesday after the company posted results that showed a return to profit in the third quarter as costs dropped. The stock rose 6.17 percent on the day.
Adjusted headline earnings were $576 million (R6 billion), compared with a loss of $135m in the previous quarter, AngloGold said.
Gold analysts in South Africa compare companies’ quarterly results sequentially.
The company, with 21 operations in 10 countries, is cutting jobs, spending and exploration and slowing production at higher-cost mines as it responds to a 22 percent decline in the gold price this year. AngloGold reduced all-in sustaining costs by 11 percent to $1 155 an ounce. On Wednesday, gold fixed $11.75 higher at $1 319 an ounce.
“People are starting to realise that this company has come $300 down the cost curve on an all-in basis,” Richard Hart, a Johannesburg-based analyst at Macquarie First South Securities, said.
The cost-cutting efforts “will help us ride any shock waves we see as far as the gold price is concerned”, Venkatakrishnan said.
“If the speculation that the gold boom is over is wrong, and the gold price were to surprise us on the upside, we will cream the extra cash flow for our shareholders.”
AngloGold suspended its dividend in August following the plunge in the gold price.
The company would be in a “much stronger position” to resume the distribution in February, when the board would meet to decide on the payment, Venkatakrishnan said.
In September, AngloGold said it had started cheaper output from new operations in the Democratic Republic of Congo and Australia earlier than planned.
In the same month, it had settled wage increases that ended a 48-hour strike in South Africa, where it produced 32 percent of its gold in the third quarter.
AngloGold was currently considering three offers for its Navachab mine in Namibia, he said.
The company would not dump assets “just to tick a box”, said the chief executive, who was appointed after Mark Cutifani left to run Anglo American. – Bloomberg