JOHANNESBURG (miningweekly.com) – Gold major AngloGold Ashanti, which beat third-quarter cost and production guidance and has recorded the safest two quarters in its history, is prioritising self-help steps to cut its debt by $1-billion and considering asset sales and partnerships, if required.

The third-quarter performance of the JSE- and NYSE-listed company headed by CEO Srinivasan Venkatakrishnan (Venkat), is characterised by free cash flow generation and debt reduction.

All-in sustaining costs (AISC), which include sustaining capital as well as corporate and exploration costs, improved 10% year-on-year to $1 036/oz and were made despite wage and winter power tariff increases.

“We will also consider the sale or partnership of an operating asset, if required,” added Venkat, who with new CFO Christine Ramon outlined the self-help steps envisaged, including the consolidation of the five mines and two surface operations into three entities to capture operating synergies. (Also see attached video)

While the international operations under Ron Largent are targeting an AISC of $900/oz, the target of the South African operations remains undisclosed at this stage because of its fundamentally higher cost structure ahead of the operational consolidation.

The intention is also to explore opportunities for partnerships or sale, potentially involving the Colombian La Colosa and Nuevo Chaquiro discoveries and the Obuasi mine in Ghana, which is being remodelled.

The company is also maintaining the option of the sale or joint venturing of operating mines.

Adjusted headline earnings were $2-million in the three months, compared with $576-million in the corresponding period of 2013.

Third-quarter production was 1.128-million ounces at a total cash cost of $820/oz, compared with 1.043-million ounces at a total cash cost of $809/oz in the corresponding period of last year and guidance of 1.06-million ounces to 1.09-million ounces at up to $890/oz.

Generating free cash flow is the key strategic objective of the company, which has returned to production growth for the first time in almost a decade, while posting the best safety performance in its history.

These initiatives together have helped the company reduce debt marginally in each of the past three quarters, despite a lower gold price.

The company has started working on a range of self-help measures to generate cash from within the current operating base to further deleverage the balance sheet over the medium term.

Cash inflow from operating activities of $320-million for the three months to September 30 was similar to the $319-million in the third quarter in 2013, despite the lower gold price received.

Free cash flow of $30-million after all expenditures in the third quarter, compared with the outflow of $222-million in the third quarter of 2013, was a result of widespread cost improvement.

AngloGold Ashanti’s long-dated debt facilities involve mostly undrawn revolving debt facilities maturing only in 2019.

The first bond matures only in 2020 and net debt to adjusted earnings before interest, taxes, depreciation and amortisation of 1.6 times is within 3.5 times covenant limits.

The company’s liquidity is underpinned by available cash, active commercial paper programmes and undrawn bank facilities, of $1-billion in US dollars and A$151-million undrawn in A$500-million Australian dollars.

Nobody has been killed on AngloGold mines for the second successive quarter.

In addition, the company’s other safety metrics reached their best levels ever, despite the potential dangers posed by the earthquake that shook the Vaal River mines in August, when all 3 300 employees working underground at the time were safely lifted to surface.

AngloGold has guiding production of 4.35-million ounces to 4.45-million ounces for 2014, an improvement despite the sale of the Navachab gold mine, in Namibia, in May, earthquake losses in South Africa and the transition of the Obuasi mine in Ghana to limited operating state by year-end.

Capital expenditure, initially set at up to $1.45-billion, has been lowered to $1.25-billion, owing mainly to savings at the loss-making Obuasi.

The forecast for AISC has been kept at up to $1 075/oz.

Reopening Obuasi – which has 8.14-million ounces of proven and probable reserves and a 27.4-million ounce resource – as a fully mechanised operation will be decided early next year.

The company will use cash flows and facilities to fund the remaining retrenchment costs at the mine during the fourth quarter.