AngloGold Posts Loss and Suspends Dividend as Bullion Drops

AngloGold Ashanti Ltd., the third-largest producer of the metal, posted a loss in the second quarter and suspended its dividend after bullion suffered a record three-month drop. Its shares slid to a 12-year low.

The adjusted headline loss, excluding one-time items, was $135 million in the quarter, from a profit of $113 million in the previous three months, the Johannesburg-based company said today in a statement. The shares dropped as much as 6.5 percent and traded 5 percent lower at 115.89 rand by 2:43 p.m. in Johannesburg, the lowest intraday level since April 2001.

AngloGold, with 21 operations in 10 countries, is cutting jobs, capital expenditure, exploration and slowing production at higher-cost mines as it adjusts to a gold price down 24 percent this year. The company, which plans to begin mining gold at two low-cost mines in the Democratic Republic of Congo and Australia this year, suspended its dividend to conserve cash.

“There are going to be two more tough quarters in 2013 as we make these changes, but going into 2014 we will see the full benefit of the two new projects and the cost savings and capex savings come through,” Chief Executive Officer Srinivasan Venkatakrishnan said today on a call with reporters.

Trim Costs

AngloGold plans to trim its all-in costs to $1,200 an ounce this year and $1,000 in 2014, said Venkatakrishnan, known as Venkat. AngloGold’s break-even costs were $1,634 an ounce in the first quarter, in part due to investment in its two new mines, according to David Davis of SBG Securities Ltd. in Johannesburg.

Gold slid 0.2 percent to $1,280.73 an ounce today and averaged $1,633 in the first quarter and $1,417 in the second.

AngloGold suspended its dividend, taking a “sensible and cautious approach” given the drop in prices and pressures on the company, Venkatakrishnan said in a separate interview.

“What you don’t want to do is keep borrowing from the banks while paying a dividend,” he said. The CEO said he is “optimistic” that cash flows will improve, while declining to comment on future dividends as they are decided by the board. The company will review its dividend at the end of this year.

The company will cut about 800 workers from the 2,000 in its corporate offices around the world and reduce its exploration budget 60 percent, it said. Corporate costs will fall by half next year from their 2012 levels.

Exploration Budget

“We are not saying we are ready to move on job cuts at any of the mines,” Venkatakrishnan said. “It’s a function of where the mine plans end up and what we see in terms of productivity improvements in the various regions. Any job cuts would be done after very careful consideration.”

The sale of the Navachab mine in Namibia is “progressing well,” he said, without elaborating. The CEO said he’s studying selling other higher-cost mines, while declining to name them.

“The market obviously for sale of assets is not very conducive from a seller’s point of view,” he said. If sales are not completed, the company will mine operations’ ore stockpiles.

AngloGold produced 935,000 ounces of gold in the second quarter, in line with the forecast published July 15, and 4 percent more than in the first three months of the year.

Production will total from 4 million to 4.1 million ounces this year, down from a previous forecast of 4.1 million ounces to 4.4 million ounces, the company said in July.

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