AngloGold Profit Rises as Post-Strike Production Increases
AngloGold Ashanti Ltd. (ANG), the third-biggest producer of the metal, said first-quarter profit rose with output following the end of strikes as it focuses on cutting costs.
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 costs 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 after dropping 15 percent and slumping into a bear market in April. AngloGold forecasts that production will rise to an estimated 4.1 million to 4.4 million ounces this year, compared with the 3.94 million ounces mined in 2012, as new projects come on line.
The company expects initial production from mines in Australia and the Democratic Republic of Congo by the end of 2013. It produced 899,000 ounces in the first quarter, up from 859,000 ounces in the previous three months, today’s statement shows. Second-quarter volumes are forecast to reach 900,000 to 950,000 ounces.
The Tropicana project in Western Australia is on schedule for first production in the fourth quarter, with annual output expected to be 470,000 to 490,000 ounces, a presentation to shareholders shows. The Kibali mine in the DRC should also produce its first gold in 2013. Elsewhere in the DRC, the Mongbwalu project has been suspended, AngloGold said.
The economics at the halted venture “just didn’t work,” Tony O’Neill, an executive director at AngloGold, said in an interview in Johannesburg.
“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,” O’Neill said. License renewals are due in 2014 and discussions with the government at that time will determine what happens next at Mongbwalu, he said.
In Colombia, AngloGold will be looking to bring in a partner, while it hopes to complete the sale of its Namibian Navachab mine by the end of the year, Venkatakrishnan said.
AngloGold was 0.2 percent higher in Johannesburg trading at 168.5 rand by 1:54 p.m.
AngloGold, whose largest overseas competitors are Barrick Gold Corp. (ABX) and Newmont Mining Corp. (NEM), appointed Venkatakrishnan as CEO this month after Mark Cutifani quit to lead Anglo American Plc. (AAL)
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