JOHANNESBURG, SOUTH AFRICA--(Marketwire - July 31, 2009) - AngloGold Ashanti Limited
(NYSE: AU) reported an 11% increase in second quarter adjusted headline
earnings to a record, after improved performance from its Tanzanian and
Ghanaian regions helped boost production.
Adjusted headline earnings increased to $167m, or US47 cents a share in the
three months to 30 June, compared with $150m, or US42 cents, in the
previous quarter.
"We saw a strong operating performance across most of the operations and a
nice sweetener from our received gold price," Chief Executive Officer Mark
Cutifani said. "We're seeing the results of our interventions in the
continued improvements at Obuasi and the early signs of a recovery at Geita
are also very encouraging for us."
AngloGold Ashanti's production during the period rose to 1.127Moz at a
total cash cost of $472/oz, from 1.103Moz at $445/oz in the prior quarter.
Higher production and lower costs were realised in South America and in
Africa, outside of South Africa.
The company has appointed new management this year to oversee its
operations in Ghana and Tanzania, part of its strategy to ensure
appropriate skills at each level in the organization. Obuasi reported a 10%
rise in production to 101,000 ounces and a 16% drop in cash costs to
$589/oz, while Geita posted a 43% increase in production to 63,000 ounces
and a 14% decline in costs.
The company's West Wits operations in South Africa raised production by 7%,
despite the large number of public holidays around Easter and the general
election. The Vaal River operations, however, reported a 15% decline in
output and a commensurate increase in costs, largely due to safety-related
stoppages.
Eight of our colleagues tragically lost their lives across the company's
operations during the quarter. This safety performance is a matter for
concern and AngloGold Ashanti's management has intensified its efforts to
improve overall safety across its operations. Interventions have been made
with teams that have had the highest accident rates to effect rapid
improvements. A broader strategy to better the organisation's safety
performance will be implemented in the first quarter of 2010. It is
important to note that AngloGold Ashanti's lost time injury frequency rate,
a broad measure of overall safety performance, declined 19% during the
quarter to its lowest level ever. There have been no fatalities since June
2.
The safety stoppages, combined with mill repairs in the first quarter at
Geita and
lower-than-anticipated recoveries from the Cripple Creek & Victor in the
U.S., have necessitated the adjustment of full-year guidance to 4.7Moz -
4.8Moz from the original target of 4.9Moz - 5.0Moz. For the third quarter,
production is estimated at 1.2 million ounces at a total cash cost of
approximately US$530 per ounce, assuming an average rand exchange rate of
R8.10 to the US dollar for the quarter.
The average price received during the quarter increased by 5% to $897/oz,
achieving a 3% discount to the spot price.
Following the successful issue of a five-year convertible bond and receipt
of the first tranche of the proceeds from the sale of its Boddington stake,
the company used $797m of its internal cash reserves to restructure its
hedge book during July.
"We've worked hard to strengthen our balance sheet and that gave us the
flexibility to skin the hedge book by getting it well below one year's
production," Cutifani said. "The market fundamentals are extremely robust
for gold, so we decided to move aggressively sooner rather than later."
The restructuring affected about 1.4 million ounces, reducing the overall
hedge commitment to 4.47 million ounces at July 25, less than one year's
production. The committed ounces are expected to decline further, to 4.1
million ounces by the end of 2009, a year ahead of target.
The company now expects to achieve a 7% discount to spot gold prices at
$950/oz gold price, with the hedge book reducing by approximately 800,000oz
a year, until it winds up at the end of 2014.