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AngloGold tightens its belt to trim losses

AngloGold Ashanti cut its dividend by half in the third quarter and reduced annual spending plans by $200 million (R2 billion) after strikes idled all of its South African mines.

“It’s been a pretty tough quarter and we’re looking at an even tougher quarter four given that this is where most of the issues were relating to the strike and labour unrest,” chief executive Mark Cutifani said yesterday on a conference call.

The walkout cost the company 250 000 ounces of lost output in the fourth quarter up to November 2, it said.

The producer cut 2012 capital spending to an estimated $2bn to $2.1bn and declared a dividend of 50c a share. Earnings excluding one-time items fell to $235m, or 61 cents a share, in the quarter from $253m in the previous quarter, AngloGold said yesterday. That missed the 70c median estimate of seven analysts.

Unofficial strikes that began in the platinum industry on August 10 spread to gold, coal and chrome mines last quarter, weakening the economy, with Finance Minister Pravin Gordhan cutting the annual growth outlook to 2.5 percent from 2.7 percent. Prices for gold, up 2.5 percent from the previous quarter, helped AngloGold weather the production stoppages.

The company’s shares fell 3.69 percent to close at R288.94 yesterday, bringing the loss for the year to about 14 percent.

AngloGold would miss its 2012 output target of 4.3 million to 4.4 million ounces, Cutifani said. Work on extending the life of mines at Moab Khotsong and Mponeng was slowing, he said. All the local mines except Mponeng had resumed operations.

The halts prompted a 4 percent drop in quarterly output to 1.03 million ounces. Weaker production led Standard & Poor’s to say on October 18 that it might cut AngloGold’s debt rating to junk.

“We’re in the middle of a review of our South African operations,” Cutifani said. “There is no doubt that we’re going to have to do some restructuring work.”

There would be “big” job losses in the mining industry unless productivity gains could be won, he told investors.

AngloGold, whose largest overseas competitors are Barrick Gold and Newmont Mining, mines about a third of its metal in South Africa, where it employs about 35 000 people.

“We’re about 90 percent through some of the tough things we’ve had to deal with,” Cutifani said. The violence at Marikana was the worst he had seen in the industry.

A commission of inquiry has been appointed by President Jacob Zuma to probe the deaths of about 46 people at Marikana in August, including 34 shot by police. Police and security personal were also killed in protests. Miners ended their six-week unprotected strike at Marikana on September 20 after the company committed to pay increases of 11 percent to 22 percent.

Wildcat strikes spread to Anglo American’s iron ore and platinum operations, as well as Xstrata’s chrome mines and Gold Fields and Harmony Gold’s businesses. The stoppages cut September gold production by 11 percent from a year earlier and platinum output by 18 percent.

AngloGold would not change strategy after the strikes, Cutifani said. “It has hurt South Africa’s reputation as an investment destination but in terms of how we think about it in the portfolio, we haven’t changed our view,” he said.

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