JOHANNESBURG (miningweekly.com) – Despite facing a number of challenges, including a stagnant gold price, mining giant AngloGold Ashanti has reported an operational performance ahead of market guidance for the three months to March 31.

The bullion producer on Monday reported output of 969 000 oz of gold for the three months, exceeding its guidance of 900 000 oz to 940 000 oz. Total cash costs were $744/oz – 3% down year-on-year – and better than the targeted $830/oz to $860/oz.

"This is an exceptionally strong performance from our international portfolio, in particular, and one which shows the benefit of our diversified portfolio.

"We've 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," CEO Srinivasan Venkatakrishnan (Venkat) said at a presentation of the company’s results on Monday.

However, the miner said its first-quarter adjusted headline earnings (AHE) were $35-million, or $0.09 a share, for the three months, compared with $119-million, or $0.29 a share, in the same period in 2014. This decrease was the result of lower ounces sold from Ghana, Namibia and South Africa, the lower gold price and a higher tax charge.

The company also reported a headline loss of $1-million – a significant improvement from the previous quarter’s loss of $71-million.

Adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) were $409-million, compared with $476-million in the first quarter of 2014, with the reduction mainly owing to a 6% decrease in the gold price received and a 9% reduction in ounces sold.

Adjusted Ebitda was also higher than the previous quarter's $407-million, despite the markedly lower output from South Africa, given the lower costs quarter-on-quarter.

A LOCAL STORY
Production from AngloGold’s South African operations fell 18% year-on-year to 239 000 oz for the quarter ended March 31, owing to safety stoppages at both the West Wits and Vaal River regions, which contributed to the 12% rise in all-in sustaining costs to $1 095/oz and a 14% increase in total cash costs to $911/oz.

Total cash costs were adversely impacted by lower production, despite currency weakness and efforts to contain inflationary pressures.

West Wits produced 93 000 oz of gold at a total cash cost of $977/oz for the quarter, compared with 128 000 oz at a total cash cost of $735/oz in the first quarter of last year. The first quarter's performance was negatively impacted by safety-related stoppages subsequent to two fatalities at the Mponeng mine, in the North West.

This was exacerbated by grades at TauTona, in Carletonville, which were 7% lower compared with the same period last year. TauTona ore, previously treated at Savuka gold plant, was also being processed at the Mponeng gold plant in an attempt to derive benefit from a higher recovery factor and cost efficiencies.

Production from the Vaal River operations for the first quarter was 94 000 oz at a total cash cost of $868/oz, compared with 102 000 oz at a total cash cost of $851/oz in the same quarter last year.

The establishment of a Vaal River district model was “progressing well” and the new model was expected to be fully functional by the second half of the year.

Kopanang's performance was negatively impacted by an ore-pass blockage, while Moab Khotsong, near Orkney, faced challenges from safety-related stoppages during the quarter under review. Yield at Moab Khotsong was 10% lower compared with the same quarter last year, owing to an increase in dilution.

The mine, however, remained the lowest cost producer among the South African operations, achieving a total cash cost of $782/oz for the quarter.

Production from the Surface Operations for the first quarter was 50 000 oz at a total cash cost of $868/oz, compared with 60 000 oz at a total cash cost of $836/oz in the same quarter last year.

The most significant challenge had been a reduction in grade. To alleviate the grade constraints, the mining mix was altered to prioritise higher-grade marginal ore dumps.

GOLD PRICE
Venkat said that, although it had now been 43 months since the gold mining industry “went into a grind”, he remained optimistic about the gold price in the long term.

“Gold is a complex commodity, it has multiple facets [and trades] as a precious metal, as a hedge against inflation, as an investment and as a safe haven asset.

“[The gold price] is like a Rubik’s cube. As you move one side, the other side changes. On a long-term basis, we are absolutely optimistic about the gold price, because the extent of money printing in the world [and] the issues we see all around the world, has to cause the gold price to go up. Having said that, in the short-to-medium term, what we are seeing is the gold price [being] largely driven by speculation around the US dollar and that is driven, in turn, by US interest rates.

“The market is waiting for a cue in terms of US interest rates; that’s the single catalyst. In [this time], we are likely to see some pressure on the gold price, but longer-term projections – absolutely positive,” he told Mining Weekly Online.

OUTLOOK
AngloGold targeted output of between 960 000 oz and one-million ounces at a total cash cost of $770/oz to $820/oz, for the second quarter, assuming an average exchange rate of R11.92 to the dollar.

The full-year production guidance remained unchanged at 4-million to 4.3-million ounces, at a total cash cost of $770/oz to $820/oz and all-in sustaining costs of $1 000/oz to $1 050/oz.