Tropicana

South Africa – AngloGold Ashanti reported a 7% year-on-year improvement in all-in sustaining costs (AISC) due mainly to a strong result from its international mines.

The company, which maintained its full-year guidance for production, costs and capital expenditure, announced on Monday its first quarter operational performance ahead of market guidance.

AngloGold’s production was 969 000 oz at total cash cost of $744/oz in the three months ended March 31, 2015, down from 1.055 Moz at $770/oz in the first quarter of 2014.

Production was affected by a slow start at its South African operations after the Christmas break, the sale of the Navachab gold mine, in Namibia, last year as well as the transition of Obuasi, in Ghana, to limited operations phase in December.

Within guidance

The first quarter result compared with the company’s guidance of 900 000 oz to 940 000 oz at $830/oz to $860/oz.

AngloGold’s AISC improved from $993/oz to $926/oz, while all-in-costs decreased by 8% from $1 114/oz to $1 026/oz over the same period.

“This is an exceptionally strong performance from our International portfolio in particular, and one which shows the benefit of our diversified portfolio ,”AngloGold Ashanti CEO Srinivasan Venkatakrishnan says.

“We have continued to focus on delivering real operational efficiencies and tight cost management, while ensuring we benefit from weaker producer currencies and lower oil prices. It shows in these results.”

AngloGold Ashanti has over the past two years cut overhead expenditure by two-thirds while improving the quality of its portfolio through the introduction of two new, low-cost mines, selling some assets, closing others and removing loss-making ounces from ongoing operations.

Portfolio optimisation

The company reports testing market interest for the sale of all or part of its Cripple Creek & Victor mine in the US, and is in talks to sell its stake in the Sadiola and Yatela mines in Mali, with the proceeds of any potential sales earmarked to reduce debt levels. Binding bids submitted for all, or part of Cripple Creek, are currently being considered.

International production results

AngloGold’s international portfolio, which covers mines in nine countries, saw AISC 13% lower than the first quarter of 2014 at $849/oz, while production from ongoing operations was 2% higher year-on-year at 730 000 oz.

Standout performances were delivered by the Geita mine in Tanzania and the Cerro Vanguardia mine in Argentina, while the contribution from Tropicana in Western Australia and Kibali in the Democratic Republic of Congo reflected their full ramp-up.

Work is currently underway on a range of brownfield projects to extend life, improve production or enhance efficiencies at Geita, Serra Grande in Brazil, Siguiri in Guinea and Sunrise Dam in Western Australia.

AngloGold said in a statement that the international portfolio helped offset a difficult start for the South Africa mines, which were impacted by safety-related stoppages and power outages.

South African production

Production from South Africa was down 18% compared with the first quarter of last year, while AISC were 12% higher. Delays in accessing higher-grade ore from the Mponeng mine’s Below 120 Level project caused primarily by safety stoppages are likely to affect efficiencies at that operation this year.

First-quarter adjusted headline earnings were $35 million, or $0.9 cents per share in the three months to March 31, 2015, compared with $119 million, or $0.29 cents per share, in the first quarter of 2014, impacted by lower ounces sold from Ghana, Namibia and South Africa, the lower gold price and a higher tax charge.

An adjusted headline loss of $117 million, or $0.29 cents per share, was recorded the previous quarter.

Adjusted earnings before interest, tax, depreciation and amortization (adjusted EBITDA) were $409 million, compared with $476 million in the first quarter of 2014, with the reduction due mainly to the 6% reduction in the gold price received and a 9% reduction in ounces sold. However, adjusted EBITDA was higher than the previous quarter’s $407 million, given the lower costs quarter-on-quarter which helped offset lower output from the South Africa region.

Outlook

Production guidance for the second quarter is estimated to be between 960 000 oz to 1 000 000 oz at total cash costs of $770/oz to $820/oz, assuming average exchange rates of R11.92/$, BRL2.95/$, $0.79/A$ and AP9.00/$. Oil is estimated at $70/bl average for the quarter.

The annual guidance remains unchanged for production at 4.0Moz to 4.3Moz total cash costs at US$770/oz to $820/oz and AISC of between $1 000/oz and $1 050/oz. Capital expenditure guidance for the year also remains unchanged at between $1.0 billion and 1.1 billion.

Both production and cost estimates assume neither labour interruptions, power disruptions or changes in asset portfolio and/or operating mines. Other unknown or unpredictable factors could also have a material adverse effect on AngloGold Ashanti’s future results.

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