AngloGold Profit Rises as Output Increases After Strikes EndPaul Burkhardt
AngloGold Ashanti Ltd., the third-biggest producer of the metal, said profit rose with output in the first quarter after strikes ended.
Adjusted headline earnings, which exclude one-time events such as asset sales, climbed to $113 million, or 29 cents a share, from $19 million, or 5 cents, in the previous quarter, the Johannesburg-based company said today in a statement.
“The stronger performance relative to the previous quarter reflects the recovery from the strike action at the South Africa operations which hampered production towards the end of last year,” AngloGold said in the statement.
Labor disruption last year hurt gold and other mining companies after spreading from the platinum industry, costing the economy 10.1 billion rand ($1.1 billion) in lost output, according to the National Treasury. In the wake of the worker unrest and plummeting gold prices, AngloGold is reviewing expenses and expansion projects and expects to sell assets.
“The focus here is going to be on better cost control, cost rationalization across the portfolio, in particular in terms of corporate costs, exploration and capital rationing,” Chief Executive Officer Srinivasan Venkatakrishnan said today on a conference call.
Bullion is having its worst start to a year since 1982, dropping 14 percent since Jan. 1 and slumping into a bear market in April. AngloGold estimates that its production will rise to 4.1 million to 4.4 million ounces this year from 3.94 million ounces in 2012 as new projects come on line.
The company’s Tropicana venture in Western Australia is on schedule for first production in the fourth quarter, with annual output forecast at 470,000 to 490,000 ounces, a shareholder presentation shows. The Kibali mine in the Democratic Republic of Congo is also due to produce its first gold in 2013.
Total output advanced to 899,000 ounces in the first quarter from 859,000 ounces in the previous three months, according to the company, whose largest global competitors are Barrick Gold Corp. and Newmont Mining Corp. Second-quarter volumes are forecast to reach 900,000 to 950,000 ounces.
AngloGold said today its Mongbwalu project in the DRC was suspended as the economics “just didn’t work,” according to Executive Director Tony O’Neill. “The gold is in deposits that are reasonably small and really make it difficult to get scale, so with current gold prices you haven’t got many options,” he said in Johannesburg. License renewals are due in 2014 and talks with the government will determine what happens next, he said.
In Colombia, AngloGold is looking to bring in a partner, while the sale of its Namibian Navachab mine should be completed by the end of the year, Venkatakrishnan said. The CEO, also known as Venkat, was appointed to the top job this month after Mark Cutifani quit to lead Anglo American Plc.
John Paulson, whose hedge fund is the largest investor in AngloGold, has said the company might increase in value if it were to split its South African business from its international units. The proposal was rebuffed by the country’s government, three people with knowledge of the matter said last month.
Gold Fields Ltd., another South African miner in which Paulson has invested, separated most of its domestic assets into new company Sibanye Gold Ltd. this year, while retaining development projects.
“If you look at the recent corporate finance transaction that took place and we’ve been watching how the share prices have performed, the value uplift has not been compelling,” Venkat said today, referring to the Gold Fields spinoff. “Free cash-flow generation, that’s really the focus at this stage.”
Gold Fields has dropped 34 percent in Johannesburg trading this year, while AngloGold has sunk 36 percent. AngloGold rose 0.6 percent to close at 169.14 rand today.