JOHANNESBURG (miningweekly.com) – Gold mining company AngloGold Ashanti said on Monday that it had cut net debt by nearly a third, after margins increased, despite lower gold prices, allowing the company to generate free cash flow of $160-million in the fourth quarter.

The company has delivered on a range of self-help measures to internally generate funds and avoid going to the market to raise new equity capital.

The sale of the Cripple Creek & Victor mine in the US for $820-million plus a royalty has enabled the company to buy back a portion of its most expensive debt.

At the same time, international mines helped expand margins even as gold prices fell.

“We’ve again shown consistency in hitting our production guidance, beating cost estimates, delivering free cash flow and delivering a sharp reduction in net debt levels. We achieved all of that despite lower gold prices,” AngloGold Ashanti CEO Srinivasan Venkatakrishnan (Venkat) said.

Net debt fell by 30% to $2.19-billion from $3.13-billion at the end of 2014, lowering the amount the company will pay in interest charges.

All-in sustaining costs (AISC) improved to an average of $910/oz in 2015, more than 11% lower than the $1 020/oz recorded the previous year, and lower than guidance of $950/oz to $980/oz.

Production of 3.95-million ounces was at the top end of guidance of 3.8-million ounces to four-million ounces.

The company, which has either met, or beaten, its cost and production guidance for 12 consecutive quarters, said year-on-year AISC improvement reflected an especially strong showing from its international operations, which saw its AISC for the year fall by more than 16% to $822/oz.

The Geita gold mine in Tanzania was once again a standout performer in continental Africa, with AISC of $717/oz, while the American operations as a whole had AISC of $792/oz.

The robust performance of the international operations once again offset a drop in output at the South African operations to 1.004-million ounces, from 1.22-million ounces in 2014, owing mainly to a combination of lower grades and safety-related disruptions during the year.

The full-year AISC of $1 088/oz at the South Africa operations was $24/oz higher than the previous year, reflecting the weaker operating performance, which was only partially offset by the weaker rand

The fourth quarter showed an improving trend, however, with the South African operations reporting AISC of $988/oz.

AngloGold’s costs also benefited from weaker currencies to the dollar in South Africa, Brazil, Argentina and Australia, where the rand, peso, real and Australian dollar often weakened along with the gold price, cushioning the negative impact.

Together, these regions accounted for about two-thirds of production, the company said, adding that lower prices for oil also helped the company, given the use of diesel fuel in power generation and transport at many of the company’s operations.

Adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) for the full year were $1 472-million, compared with $1 616-million in 2014, reflecting lower production year-on-year and weaker average price received.

Free cash flow for the full year improved to $141-million, compared with an outflow of $112-million in 2014.

This achievement was all the more noteworthy given that it occurred despite the 8% drop in the gold price.

Net debt to adjusted Ebitda levels ended the year at 1.49 times, lower than the 1.94 times recorded at the end of 2014, highlighting the success of the decisive, deleveraging efforts.

SAFETY

Eleven personnel lost their lives in the workplace during 2015, underlining safety as the most pressing challenge for the company, primarily at its South African operations.

Significant effort was being expended to not only understand the cause of each of these incidents, but also the root cause of other high potential incidents that could have resulted in fatalities.

There had been some success in this regard, with the all-injury frequency rate, the broadest measure of workplace safety, improving to 7.18 a million hours worked, from 7.36 the previous year.

FOURTH QUARTER

AngloGold delivered another strong operating and financial result for the three months ended December 31 ahead of cost and production guidance despite safety-related stoppages that lowered output in South Africa.

Fourth-quarter production of 997 000 oz was 14% lower than the corresponding period in 2014 but 2% better than the prior quarter and better than guidance of 900 000 oz to 950 000 oz.

AISC of $860/oz were 14% better than the corresponding period in 2014, reflecting rigorous cost and capital allocation discipline across the company.

South Africa had started to show a modest recovery from its operational challenges related principally to safety disruptions in the first three quarters of the year.

While production was 16% lower than the corresponding period in 2014, it was consistent with the third quarter at 252 000 oz.

AISC of $988/oz was 10% better than the fourth quarter of 2014, and 16% better than the previous quarter.

The international operations delivered production of 745 000 oz at AISC of $786/oz, which corresponded to a 7% decrease in production but a 17% improvement in AISC on the same quarter of 2014.

OUTLOOK

Production guidance for 2016 year was estimated to be between 3.6-million ounces and 3.8-million ounces.

Total cash costs are estimated to be between $680/oz and $720/oz and AISC between $900/oz and $960/oz at average exchange rates against the US dollar of R15, 4.00 (Brazil real), 0.70 (Australian dollar) and 14.90 (Argentina peso), with oil at $35/bl average for the year.

The company anticipated capital expenditure of between $790-million and $850-million, of which $120-million to $140-million was earmarked for projects.

Corporate and marketing costs were estimated to be up to $90-million and expensed exploration and study costs, including equity accounted investments, up to $150-million.

Depreciation and amortisation was forecast at $820-million and interest and finance costs at $190-million.