AngloGold Skips Dividend Even as Production Rises, Costs Fall

AngloGold Ashanti Ltd. (ANG), the world’s third-largest producer of the metal, withheld a dividend for the second half of 2013 even as it increased annual production for the first time in nine years and lowered costs.

AngloGold, which cut its dividend in August, had a free cash outflow of $82 million in the fourth quarter, an improvement from an outflow of $205 million in the previous three-month period, the company said in a statement today. Gold production rose 18 percent to 1.2 million ounces, while total output costs declined 12 percent to $1,015 an ounce, it said.

“It’s not a smart move to borrow money from the banks and pay dividends,” Chief Executive Officer Srinivasan Venkatakrishnan said in a call with reporters. “The dividend prospects for 2014 are still intact.”

AngloGold, with 23 operations in 11 countries, is cutting expenses and exiting higher-cost sites as it seeks to remain profitable at a gold price that is more than 20 percent lower than the beginning of last year. Production in Africa, boosted by AngloGold’s Kibali mine in the Democratic Republic of Congo, was the highest since 2005 and output in the Americas was the most on record, Venkatakrishnan said.

“The cash machine is generating despite the gold price going against us,” he said. “Every metric that’s within our control has gone in our favor. Production has improved, two new projects are ramping up, cost control is paying off.”

Profit Drop

Bullion slipped 0.1 percent to $1,320.18 an ounce at 10:38 a.m. in Johannesburg, bringing its decline since the beginning of 2013 to 21 percent. The stock fell 0.8 percent to 189 rand a share in the city. It has dropped 28 percent since the start of last year.

AngloGold’s adjusted headline earnings, which exclude one-time items, were $45 million in the three months ended Dec. 31, compared with $576 million in the previous quarter. Third-quarter profit was boosted by an accounting gain on the company’s bonds while it took impairments on a loan and adjusted the value of stockpiles in the fourth quarter, Venkatakrishnan said.

The company agreed to sell its Navachab mine in Namibia for $110 million this month and may shut down production at Obuasi in Ghana for as long as two years, according to the country’s mining minister.

AngloGold is aiming to exit or shut down unprofitable operations, Venkatakrishnan said. “We continue to look at the portfolio all the way through,” he said.

Former South African central bank Governor Tito Mboweni stood down as AngloGold chairman this week. He will be replaced by Sipho Pityana, who has been an AngloGold non-executive director for seven years.

The company forecasts output of 4.2 million to 4.5 million ounces for 2014, with all-in sustaining costs of $1,025 to $1,075 an ounce.

To contact the reporter on this story: Kevin Crowley in Johannesburg at kcrowley1@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.