David Stringer
There would be significant cuts in gold production in response to the tumble in the metal’s price, according to Anglo American chief executive Mark Cutifani, who previously ran Africa’s largest producer.
“I don’t see the gold price staying low for a protracted period of time because the drop in production that will occur will be quite significant and will surprise everybody,” Cutifani said yesterday in an interview in Canberra.
“I don’t know whether it will be in six months, a year, three years,” Cutifani said. “The position will flip back and gold will reassert itself.“
He left his position leading AngloGold Ashanti in April, when he took up his post at London-headquartered Anglo American.
Gold producers are reducing production, costs and staff as bullion heads for its biggest annual decline since 1981.
After reaching a peak of $1 921.15 an ounce in September 2011, the metal fell into a bear market in April.
Gold fixed at $1 236.25 (R12 410) an ounce yesterday afternoon in London, down $42.75 from Tuesday’s second fix.
“It’s going to be a terrible quarter for the industry,” said Cutifani, who said he held gold in his own investment portfolio. “The industry is going to have to adjust very quickly.”
Credit Suisse Group expects gold prices of $1 150 in 12 months, while Bank of America Merrill Lynch has said the metal might drop to $1 200 in coming weeks.
In a speech yesterday to a mining industry forum, also in Canberra, Cutifani said that overall the outlook was grim for mining as companies adapted to lower prices and weakening demand.
“It does look pretty grim, certainly for the thermal coal industry,” Cutifani said.
Anglo is cutting jobs and halting production at its Aquila coal mine in Queensland, as are Glencore Xstrata, Peabody Energy and Rio Tinto, which also have operations in Australia.
Companies across the mining sector were seeking to cut costs, Peter Johnston, the head of nickel assets at Glencore Xstrata, told the same Canberra meeting.
“We have clearly entered a more demanding phase. Commodity prices and profits are down,” Johnston said. “It’s having an impact right across the industry.”
But Cutifani said Anglo American was prepared to be “opportunistic” in pursuing acquisitions even as falling commodity prices forced the mining industry to reduce spending.
“We will keep ourselves open to possibilities, but the one word that will drive decisions we make will be value,” he said. “If you look at Glencore, they bought assets at the bottom of the cycle and have done well.”
After leaving his post as chief executive of AngloGold Ashanti to join Anglo, Cutifani pledged to scrutinise every aspect of the business.
After a business review that has focused on performance, allocation of capital and the importance of South Africa to the company’s portfolio, Cutifani said he would announce the outcome next month.
After posting a $1.5 billion full-year loss for 2012, Anglo is forecast to post earnings of $2.6bn for fiscal 2013, according to the mean of 14 analyst estimates. – Bloomberg