Feb. 20 (Bloomberg) -- AngloGold Ashanti Ltd., the third-biggest producer of the metal, will cut investment in projects this year and may reduce output estimates should labor unrest reawaken in South Africa following a spate of strikes in 2012.
Capital expenditure will decline to $2.1 billion from $2.2 billion in 2012, the company said today in a statement. Gold output, down 17 percent to 859,000 ounces during the fourth quarter because of strikes, may be as much as 950,000 ounces in the three months to March depending on the labor situation. Unrest cut production, reducing profit 29 percent last year.
“In terms of capital and spending disciplines, we tightened up considerably,” said Chief Executive Officer Mark Cutifani, who is leaving the Johannesburg-based company to replace Cynthia Carroll as CEO of Anglo American Plc on April 3. “Capital numbers are being kept tight and we will continue to trim where we don’t see real short-term uplift.”
Strikes that began at platinum operations in August spread to gold, coal and chrome producers, cutting mining output by 10.1 billion rand ($1.1 billion), according to South Africa’s National Treasury. AngloGold, which digs about a third of its metal in the country, may split off the assets from other mines should investors undervalue the business, Cutifani said Nov. 21.
Adjusted earnings excluding one-time items dropped to $924 million, or $2.39 a share, last year from $1.3 billion, or $3.36, the company said today in a statement. That compares with the $3.03 median estimate of 14 analysts surveyed by Bloomberg.
The shares declined 3.6 percent to 232.30 rand by the close in Johannesburg, the lowest since December 2008. The FTSE/JSE Africa All Share index retreated 0.8 percent.
AngloGold, whose largest overseas competitors are Barrick Gold Corp. and Newmont Mining Corp., said output was 3.94 million ounces for the year, missing a target of 4.3 million to 4.4 million ounces. Total cash-costs per ounce rose 14 percent to $1,009, it said.
The company cut its third-quarter dividend in half and trimmed annual spending plans by $200 million after all of its South African mines were halted by staff walkouts. AngloGold will pay a dividend of 50 South African cents a share for the fourth quarter, matching the payout in the previous three months, it said.
Fourth-quarter adjusted headline earnings declined to 2 cents a share from 61 cents in the previous quarter as labor strikes added to the company’s costs. That compares with the 47-cent median estimate of five analysts surveyed by Bloomberg. Gold analysts in South Africa compare quarters sequentially.
Industrial unrest and above-inflation pay gains were partly behind the decision by Gold Fields Ltd. to spin off some of its South African assets. Sibanye Gold Ltd. was listed on Feb. 11.
“In terms of a broader portfolio conversation, the board and the executive are continuing to go through options, looking at possibilities,” Cutifani said today. “Obviously everybody’s watching the Gold Fields performance and seeing how they’ve gone. And so we’re in that process.”
AngloGold is reviewing costs and expansion projects and plans to offload peripheral assets, with the Navachab mine in Namibia earmarked for sale, according to Chief Financial Officer Srinivasan Venkatakrishnan, who will act as joint CEO with Vice President of Business and Technical Development Tony O’Neill until a replacement for Cutifani is found.
Group gold 2013 output is estimated at 4.1 million ounces to 4.4 million ounces, with total cash costs of $815 to $845 an ounce, the company said. While the company expects to produce as much as 950,000 ounces at $900 to $910 an ounce this quarter, it may revise the estimates down if there’s further labor unrest.
Cutifani, also president of South Africa’s Chamber of Mines, said Mineral Resources Minister Susan Shabangu met with companies and unions to “work through the details” of a “protocol agreed in principle” following Feb. 18 clashes at Anglo American Platinum Ltd.’s Siphumelele mine in which 13 people were hurt. Shabangu met unions and companies yesterday.
“The conversations in South Africa from an industrial point of view are going to be very important in the next few months,” he said. “The fact that the minister engaged so quickly when we saw a few problems emerge on the platinum side is very encouraging and it demonstrates that lessons have been learnt from some of the tough issues we saw last year.”
AngloGold yesterday signed a $750 million term facility with a “small group of banks,” which it may use to redeem convertible bonds due in May 2014, removing refinancing risk, Senior Vice President of Investor Relations Stewart Bailey said by phone today. The terms of the facilty are “broadly similar” to the company’s $1 billion revolving facility, he said, declining to provide further details.
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