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AngloGold production up 8%, all-in costs down 13%

AngloGold Ashanti CEO Srinivasan Venkatakrishnan

AngloGold Ashanti CEO Srinivasan Venkatakrishnan

Photo by Duane Daws

23rd February 2015

By: Martin Creamer

Creamer Media Editor

  

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JOHANNESBURG (miningweekly.com) – Two consecutive years of production growth plus a 13% improvement in all-in sustaining costs (AISC) have been posted by gold major AngloGold Ashanti.

“A very good production performance,” AngloGold Ashanti CEO Srinivasan (Venkat) Venkatakrishnan told Creamer Media’s Mining Weekly Online in a early morning media conference.

Free cash flow rose to $142-million on total cash costs of $787/oz.

Capital expenditure (capex) of $1.2-billion was 39% below that of 2013 and corporate and year-on-year corporate costs 54% down at $92-million.

Exploration costs were 44% lower at $144-million and earnings stable at $1 665-million, despite a 10% drop in the gold price for the period.

In posting its results for the 12 months to December 31, the ten-jurisdiction gold-mining company reported that 8%-higher production of 4.44-million ounces was at an AISC of $1 026/oz in the 12 months through December 31.

This was up from the 4.1-million ounces at $1 174/oz in 2013 - with the result matching guidance, almost exactly in the case of AISC, which is a measure that captures direct operating costs, corporate and exploration expenditure and capital investment required to sustain the business.

"The second year of growth is gratifying but the real focus for us is on improving margins. Regardless of the gold price, we won't relax the pressure on costs or hesitate to take out marginal production if needed," Venkat commented.

In 24 months, the company has slashed two-thirds off overhead expenditure and brought in two low-cost mines, selling some assets, closing others and removing lossmaking ounces from ongoing operations.

AISC for 2014 are 18% lower than they were in 2012, while production is up 12% over the same period as Kibali and Tropicana have ramped up output.

Despite a 10% drop in the average gold price, the company's adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) remained steady at $1.67-billion, while free cash flow – excluding once-off retrenchment costs in Ghana and the Rand Refinery loan – improved to $142-million compared with an outflow of $1.06-billion the previous year.

The improved operational performance was achieved along with a record safety performance, with the fewest number of workplace fatalities.

Mining in Africa, outside of South Africa, was fatality free for the first time ever.

AngloGold Ashanti is pursuing a range of measures to generate cash from internal sources to reduce debt by about $1-billion over the medium term.

These steps include pursuing additional savings from current operations, realising synergies from combining neighbouring mines and infrastructure in South Africa and potentially introducing partners in key areas, most notably projects in Colombia and in one of its operating assets.

Underground production has ceased at the Obuasi mine in Ghana, where the focus is now on the feasibility study – which is being reviewed by SRK –  into the redevelopment of the high-grade orebody as a fully mechanised operation.

The study is nearing completion, following which it will be optimised, while discussions with the government and potential funding and operating partners will be held.

AngloGold Ashanti recorded strong operating results in the fourth quarter, when production of 1.156-million ounces was 2.5% better than the previous quarter and better than guidance.

Total cash costs of $724/oz were 12% better than the preceding quarter, which averaged $820/oz, and well ahead of guidance.

Production guidance for the first quarter of 2015 is estimated to be between 900 000 oz to 940 000 oz at total cash costs of $830/oz to $860/oz, assuming average exchange rates against the dollar of 11.60 (Rand), 2.60 (Brazil Real), 0.85 (Australian dollar) and 9.50 (Argentina Peso), with oil at $70/bl.

This guidance takes into account the slow seasonal ramp-up in production following the Christmas break, ongoing power disruptions and also interruptions to normal operations related to safety-related stoppages, all in South Africa.

Full-year production guidance for the year is now between 4-million ounces to 4.3-million ounces, reflecting the sale of the Navachab mine, reduction in production from Mali, cessation of underground production at Obuasi, only partially offset by the ramp-up in production from Cripple Creek & Victor starting after the first quarter.

Total cash costs are now anticipated to be $770/oz to $820/oz, which factors in the average exchange rates against the dollar of 11.60 (Rand), 2.60 (Brazil Real), 0.85 (Australian dollar) and 9.50 (Argentina Peso), with oil at $70/bl.

AISC are forecast at $1 000/oz to $1 050/oz.

Capex for the full year is expected to be $1-billion to $1.1-billion.

Edited by Creamer Media Reporter

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