Johannesburg - AngloGold Ashanti posted strong operational and production results in the quarter to March, as the losses from the Obuasi Mine in Ghana have necessitated a restructuring that will include mechanisation and retrenchments.
Chief executive Srinivasan Venkatakrishnan said the company was taking a radical approach to arrest the cash bleed at the 100-year-old mine.
“We are taking a radical approach to this mine; we have spent the last few months talking with the Ghanaian government, the labour union, chiefs and we have consulted with sector ministers,” he said.
“The principle of our proposal is to scale down the activities of the mine so as to scale down the bleed rate which is unaffordable.”
AngloGold bought the mine, which employs 6 500 people, in 2003 and has lost more than $1 billion (about R17bn) since. The losses include $40 million to date this year, $220m last year and $120m in 2012.
Production and costs beat market guidance, with output rising 17 percent year on year to 1.06 million at a cost of $770m, helped by a weaker rand.
Venkatakrishnan expects the new administration to make the mining sector stable and investor friendly, while balancing the social fabric of the country.
“I know South Africa is going through challenges in mining. I’m not negative about South Africa. Every country has to go through this galvanising experience before it comes through on the other side stronger,” he said.
This comes as the strike in the platinum sector reached 17 weeks.
AngloGold has cut its corporate and exploration costs and safety and environmental incidents have been reduced.
At the same time, AngloGold’s covenants were relaxed by the banks, and its technology and innovation project in South Africa has made progress with 50kg of gold being retrieved from the test sites.
Debt has been reduced to $3.1bn and includes the costs for the acquisition of Mine Waste Solutions, the Kibali mine in the Democratic Republic of Congo and Tropicana mine in Australia last year.
Adjusted headline earnings rose to $119m from $45m in the previous quarter.
Guidance for the quarter was between 950 000 and 1 million ounces at a total cash cost of between $800 and $850 an ounce.
Output from most regions improved with exception for South Africa, which struggled with safety-related stoppages and production challenges at the TauTona mine. Second-quarter production in South Africa will decline owing to the public holidays.
Production at local operations declined 11 percent due to safety-related stoppages to 290 000 ounces in the quarter.