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AngloGold Ashanti
Precious Metals  
22 February 2017

AngloGold Ashanti to pay dividend after doubling its cash flow

AngloGold Ashanti has announced that it will resume dividend payments following a hiatus of more than three years, in light of doubling its free cash flow in 2016.

AngloGold Ashanti said that lower operating and interest costs helped it to nearly double its free cash flow to $278 million for the year ended December 2016.

AngloGold Ashanti resultantlyn declared a dividend of approximately 10 US cents per share for 2016.

Adjusted headline earnings were $143 million, or 35 US cents per share, compared with $49 million, or 12 US cents per share in 2015. The sharp improvements in free cash flow and earnings were achieved through strong ongoing focus on cost and capital discipline, as well as a higher gold price.

AngloGold Ashanti has since 2013 used ‘self-help’ measures, including asset sales and efficiency improvements to reduce debt and improve balance sheet flexibility without diluting shareholders. It has also improved safety and cash-flow margins across its 17-mine portfolio.

The company has further prioritised inward investment in high-return brownfield projects over acquisitions, as it seeks to improve the quality of its production base and extend mine lives.

“Production from our operations delivered a strong turnaround in the second half of the year. We have again generated strong cash flows despite a volatile gold price, which has further strengthened our balance sheet and improved flexibility,” CEO Srinivasan Venkatakrishnan said.

“We will continue to deliver on our strategy through the development of high-return, brownfield projects in order to continue to improve the underlying quality of our portfolio.”

All-in sustaining costs (AISC) came in within the revised guidance range at $986/oz, up from $910/oz in 2015. The AISC reflects continued cost discipline and weaker local currencies in some jurisdictions, offset by an increase in sustaining capital expenditure and inflation.

Production of 3.6 Moz of gold was within the original guidance for the year at a total cash cost of $744/oz, compared to 3.8 Moz (excluding discontinued operations) at $712/oz in 2015.

Production was negatively impacted by weaker output from the South African mines due mainly to safety-related stoppages, lower grades from Kibali, a planned decrease in head grades at Tropicana and Geita, and no production contribution from Obuasi.

Both Mponeng and Moab Khotsong in South Africa delivered increased production over the prior year, along with Iduapriem and Siguiri in the Continental Africa Region, and Sunrise Dam in Australia. Mponeng delivered the best improvement, with a 16% increase in production and a 14% decrease in AISC year-on-year.

Second half performance

AngloGold Ashanti delivered a steady operating and financial performance in the second half of 2016, with production coming in at 1.9 Moz compared to 2.0 Moz in 2015. This operating result was achieved despite safety-related stoppages that impacted output by roughly 60 000 oz in South Africa, planned lower grades at Geita and Tropicana, and the Obuasi mine having been on care and maintenance for last year. These negative production factors were partly offset by continued focus on tight cost control, a 14% higher realised gold price, and weaker currencies in some jurisdictions.

AISC for second half of 2016 was $1,058/oz, higher than the $897/oz for the second half of 2015 due mainly to lower gold ounces sold, higher overall cash costs, higher brownfields exploration costs, and increased sustaining capital expenditure.

Adjusted EBITDA of $767 million increased by 13% in the second half of 2016 compared to $679 million in the second half of 2015, due to the 14% increase in the average gold price received, which was partially offset by a 5% reduction in ounces sold over this period.

Proven and probable gold reserves at year end of 50.1 Moz, substantially offset depletion during the year.

Safety

The number of fatal accidents across the group’s operations reduced by more than a third compared with 2015. Regrettably, however, six operating fatalities were recorded in South Africa during 2016 and another in Brazil.

Outlook

Production guidance for 2017 year is estimated to be between 3.6 Moz and 3.755 Moz. Total cash costs are estimated to be between $750/oz and $800/oz and AISC between $1 050/oz and $1  100/oz at average exchange rates against the US dollar of R14.25, BRL3.40 (Brazil Real), A$0.75  and ARS16.50 (Argentina Peso), with oil at $58/bl average for the year, based on market expectations.

Capital expenditure is anticipated to be between $950 million and $1 050 million.

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