31 July 2009
AngloGold Ashanti Posts Record 2nd-Quarter
Earnings on Higher Production, Gold Price
AngloGold Ashanti Limited. reported
an 11% increase in second quarter adjusted headline earnings to a record, after
improved performance from its Tanzanian and Ghanaian regions helped boost
production.
Adjusted headline earnings increased to $167m,
or US47 cents a share in the three months to 30 June, compared with $150m, or
US42 cents, in the previous quarter.
``We saw a strong operating performance across
most of the operations and a nice sweetener from our received gold price,''
Chief Executive Officer Mark Cutifani said. ``We're seeing the results of our
interventions in the continued improvements at Obuasi and the early signs of a
recovery at Geita are also very encouraging for us.''
AngloGold Ashanti's production during the
period rose to 1.127Moz at a total cash cost of $472/oz, from 1.103Moz at
$445/oz in the prior quarter. Higher production and lower costs were realised
in South America and in Africa, outside of South Africa.
The company has appointed new management this
year to oversee its operations in Ghana
and Tanzania,
part of its strategy to ensure appropriate skills at each level in the
organization. Obuasi reported a 10% rise in production to 101,000 ounces and a
16% drop in cash costs to $589/oz, while Geita posted a 43% increase in
production to 63,000
ounces and a 14% decline in costs.
The company's West Wits operations in South Africa
raised production by 7%, despite the large number of public holidays around
Easter and the general election. The Vaal
River operations,
however, reported a 15% decline in output and a commensurate increase in costs,
largely due to safety-related stoppages.
Eight of our colleagues tragically lost their
lives across the company's operations during the quarter. This safety
performance is a matter for concern and AngloGold Ashanti's management has
intensified its efforts to improve overall safety across its operations. Interventions
have been made with teams that have had the highest accident rates to effect
rapid improvements. A broader strategy to better the organisation's safety
performance will be implemented in the first quarter of 2010. It is important
to note that AngloGold Ashanti's lost time injury frequency rate, a broad
measure of overall safety performance, declined 19% during the quarter to its
lowest level ever. There have been no fatalities since June 2.
The safety stoppages, combined with mill
repairs in the first quarter at Geita and lower-than-anticipated recoveries
from the Cripple Creek & Victor in the U.S., have necessitated the
adjustment of full-year guidance to 4.7Moz - 4.8Moz from the original target of
4.9Moz - 5.0Moz. For the third quarter, production is estimated at 1.2 million
ounces at a total cash cost of approximately US$530 per ounce, assuming an
average rand exchange rate of R8.10 to the US dollar for the quarter.
The average price received during the quarter
increased by 5% to $897/oz, achieving a 3% discount to the spot price.
Following the successful issue of a five-year
convertible bond and receipt of the first tranche of the proceeds from the sale
of its Boddington stake, the company used $797m of its internal cash reserves
to restructure its hedge book during July.
``We've worked hard to strengthen our balance
sheet and that gave us the flexibility to skin the hedge book by getting it
well below one year's production,'' Cutifani said. `` The market fundamentals
are extremely robust for gold, so we decided to move aggressively sooner rather
than later.''
The restructuring affected about 1.4 million
ounces, reducing the overall hedge commitment at 25 July to 4.47 million ounces
at July 25, less than one year's production. The committed ounces are expected
to decline further, to 4.1 million ounces by the end of 2009, a year ahead of
target.
The company now expects to achieve a 7% discount
to spot gold prices at $950/oz gold price, with the hedge book reducing by
approximately 800,000oz a year, until it winds up at the end of 2014.
ENDS