AngloGold Ashanti expects to close the sale of its South African assets by the second quarter of next year. File Photo: IOL

JOHANNESBURG – AngloGold Ashanti expects to close the sale of its South African assets by the second quarter of next year, it said yesterday as it told the market that inflationary pressures and lower grades in the third quarter of 2019 would impact its production forecast for the year.

AngloGold chief executive Kelvin Dushnisky told journalists yesterday during a phone interview that site due diligence by prospective bidders was complete and the company expected to update the market on this process by the end of the year.

“The process is going very well. It is going exactly according to plan. There has been a very strong interest from qualified listed bidders. The next phase is for us to get bids, which we expect in the next coming weeks. I cannot tell you how many companies are interested in the assets. I can tell you the list is strong,” he said.

AngloGold said in May that it planned to review divestment options for its Mponeng mine, the world's deepest mine, and other South African assets where it employs 6 000 people to focus on higher returns elsewhere.

“In terms of closing the transaction, that will happen in the new year. It will be the first or second quarter of next year subject to various conditions,” Dushnisky said.

The company was also disinvesting from its interests in Sadiola in Mali and Cerro Vanguardia in Argentina in a strategic move to streamline its portfolio. 

“We have had new entrants in the bidding phase for both assets (Sadiola and Cerro Vanguardia) during the third quarter. We are encouraged by the level of interest,” Dushnisky said.

Dushnisky said talks between the company's operating partner at the Kibali mine in the Democratic Republic of Congo (DRC), Barrick Gold, and the government of that country continued on the repatriation of $177 million (R2.58 billion) from the DRC. "Free cash flow continued to be affected by the slower than anticipated repatriation of cash from the DRC for Kibali loan repayments,” he said. 

The company generated $87m of free cash flow after growth of capital in the quarter, which was significantly higher than the $34m generated in the comparable quarter of last year. 

In terms of the 2019 guidance, the company said production would likely be in the lower half of the range and costs at the upper end of the range.

“From a cost perspective, inflationary pressure picked up in the third quarter and in terms of production the grades were lower,” said Dushnisky.

He cited the 9 percent higher total cash costs at $786 an ounce up from $722 an ounce reported a year earlier. 

Year-on-year costs were also impacted by lower grades, inflation, as well as lower silver by-products from Cerro Vanguardia. 

The higher total cash costs caused an increase in sustaining capital, resulting in a 12 percent jump in the all-in sustaining costs to $1 031 an ounce, compared to the third quarter of 2018.

Output fell 3 percent year-on-year to 825 000 ounces from  851 000 ounces in 2018, due to lower grades at Mponeng, the planned reduction in output from Cerro Vanguardia, which now produced fewer by-products, and at lower grades at Kibali, where open-pit mining was contributing fewer ounces. However, output increased by 3 percent during the third quarter of 2019, compared to the preceding quarter. The company said it was bullish about its Obuasi mine in Ghana, which was set to resume production by year-end.

AngloGold shares closed 6.86 percent lower at R303.15 on the JSE yesterday.