AngloGold Ashanti covid-19
Mponeng mine
Multi-listed gold major AngloGold Ashanti has set new safety records and achieved its first ever March quarter without a fatal accident.

AngloGold Ashanti, which operates the world’s deepest mines, has passed 282 days without a fatal accident in South Africa, surpassing a previous record of 242 days, set in 2014.

Sadiola, Yatela, Siguiri, Iduapriem, Obuasi, and Sunrise Dam ended the March quarter injury free, and the South African operations have now exceeded five million consecutive shifts without a fatality.

Production was 830 000 oz at an average total cash cost of US$813/oz, compared to 861 000 oz at $702/oz in the first quarter of 2016, with costs pushed higher by lower grades and significantly stronger currencies in key operating regions.

AngloGold Ashanti’s international operations, which account for almost three-in-four of its gold ounces mined, delivered another good quarter according to their plans, whilst the South African operations, with the exception of Mponeng, had a poor production performance in the seasonally weak first quarter.

“Our international operations have again delivered a strong result, with our Brownfields investments proceeding to plan,” states Srinivasan Venkatakrishnan, CEO of AngloGold Ashanti.

“On the back of the strong safety result, we are closely scrutinising the under-performing areas of our South African operations to restore margins. Remedial steps taken to ensure they recover from a difficult start to the year are already bearing fruit.”

This year, AngloGold Ashanti is re-investing in high-return, Brownfields projects to improve the overall quality of its portfolio and extend mine lives. The company has in recent years rebuilt its balance sheet without diluting shareholders, through tight cost management, efficiency improvements and debt reduction, all while making significant improvements to safety.

Net debt improved by 3% from the first quarter of last year to $2.05 billion. Balance sheet flexibility was also maintained, with net debt to adjusted earnings before interest, tax, depreciation and amortisation remaining within its own target of 1.5 times, through the business cycle, and well below its debt covenants of 3.5 times.

AngloGold Ashanti has ample liquidity of $1.46 billion, with no near-dated maturities, and sufficient covenant headroom.

Production from the international operations was 632 000 oz at a total cash cost of $714/oz for the first quarter of 2017, up from 625 000 oz at a total cash cost of $674/oz in the corresponding period last year. This increase reflected solid performances across the portfolio, with exceptional performances from Siguiri, Iduapriem, Kibali and Cerro Vanguardia.

All-in sustaining costs (AiSC) for the first quarter were $963/oz, up from $822/oz for the first quarter of 2016, with the increase attributable to the impact of stronger local currencies, lower average grades and the planned increase in sustaining capital expenditure.

Total capital expenditure during the first quarter of 2017 was $216 million, up from $128 million for the first quarter of 2016. Total capital expenditure included $186 million of sustaining capital expenditure and $30 million of project capital expenditure. Capital expenditure is expected to increase in the remaining three quarters of the year, in line with historical seasonal trends.

The added focus on a safe start-up contributed to an unusually slow ramp-up in South Africa, after the year-end break. This was compounded by more lower-grade areas mined at some operations than planned, fractured ground in areas currently being mined at TauTona and Moab Khotsong and instances of unwarranted deviations from mining plans.

Steps taken to address the poor adherence to mining plans, management work routines and to improve productivity have already resulted in an improvement in mineable face length, leading to production volume recoveries in the second half of the first quarter of 2017.

These improvements will also contribute to the forecast for an overall increase in production rates over the remainder of the year.

Full-year guidance

Adjusted earnings before interest, tax, depreciation and amortisation was $314 million for the first quarter of 2017, down from $378 million for the first quarter of 2016.

The guidance for the full year remains unchanged as follows:

Production between 3.6 Moz and 3.75 Moz; capital expenditure between $950 million and $1,billion; total cash costs between $750/oz and $800/oz; and AiSC between $1.050/oz and $1.100/oz, assuming average exchange rates against the US dollar.

Feature image: The Mponeng mine in the North West Province of South Africa

All images courtesy of AngloGold Ashanti