JOHANNESBURG (miningweekly.com) – Gold major AngloGold Ashanti is using a promising low-cost strategy of discovery and development to attain its stretch target of 5.5-million ounces of gold a year by 2014.

Marking gold’s current global flourish with a cash-gushing, dividend-hoisting third-quarter performance in which only its production fell slightly short of the mark, AngloGold CEO Mark Cutifani spoke of the company having its “arms around” an astonishing Colombian orebody that could be “game-changing” for the gold miner that doubled its year-on-year operational cash generation to R6.7-billion ($863-million) in the three months to September 30.

“We’re looking very strong for a target of 5.5-million ounces by 2014,” Cutifani commented to Mining Weekly Online in an attached video interview.

What’s more, the world’s third-biggest gold-mining company is in Colombia at “almost a net nil cost”.

“We’ve been exploring at La Colosa for almost four years now and we’ve had some new intersections as we’ve worked our way north,” he said.

The other plus with that deposit is that the exploration team has struck a rich 14 g/t vein that could mean potential to go underground.

With the gold price at a lofty $1 795/oz, the South Africa-based business is adding ounces to its portfolio at a cost of less than $35/oz while achieving record R3,5-billion ($457-million) third-quarter profit.

“Our record results, record margins and very good cash flows are underpinned by our ability to bring exploration projects into the broader portfolio.

“We’re focusing on keeping our capital costs low for developing new projects,” he added.

CFO Srinivasan Venkatakrishnan reported margins of 57% on a total cash cost basis and 36% on fully costed after all capital expenditure, which helped the company to continue to deliver on its targeted returns on capital and equity of more than 15% a year.

While formal capital expenditure numbers will only be firmed up in the next quarter, the company anticipates spending about $1.6-billion to $2-billion capital a year in the next two years, and then tail off after attaining the 5.5-million ounces a year production target.

While massive capital blowouts have been seen across the industry, AngloGold has hit its capital forecast in the last three years.

The company has “great new prospects” in Guinea, the Democratic Republic of Congo (DRC), Brazil, Argentina, Colombia and Australia.

The Tropicana gold project in Australia is on budget and on schedule for first gold pour in the fourth quarter of 2013 and will provide the company with an average three years of production of 300 000 oz.

Kibali’s openpit development in the DRC is on schedule and on budget, with first production expected in early 2014.

“This is a tier-one asset by any measure across the global industry and we have a great partner in Randgold Resources,” Cutifani told Mining Weekly Online.

Although AngloGold’s 100%-owned Mongbwalu project, also in the DRC, is a smaller project than Kibali, it is high grade in “an extremely prospective district”.

“We’re hoping to be producing gold there as well in 2014.”

In Brazil, Corrego do Sitio potential of 200 000 oz/y is seen in what appears to be a five-million ounce deposit.

At the purchase price of $85-million, this is one of the global gold industry’s lowest-cost developments.

Operationally, the once problematic Geita in Tanzania has seen a 30% underlying productivity improvement and better grades at depth.

“From losing $120-million cash three years ago, we’re generating $250-million to $300-million, a massive turnaround.”

Obuasi in Ghana, also seen as problematic, has been generating record free cash flow for the last nine months, which will help to fund the new developments being put in place.

An upbeat Cutifani concluded his presentation with the words, "as a company, we've never looked stronger".

DOUBLE DIVIDEND

On suggestions that the company's sharp dividend rise should have been sharper in view of gold's pre-eminent current position, Cutifani told Mining Weekly Online that AngloGold had more than doubled its dividend from last year.

"You never seem to be able to please everyone. There are a couple of people who said maybe we could have done a bit more. That's probably a fair comment, but as a company, we think it's important to build progressively off strengthening cash flows.

"We're not the sort of company that pulls the rug out from under a dividend when we see a little bit of heavy weather.

"We don't play fast and loose. We're consistent and we build progressively. Certainly there's room for some upside. The gold price remains strong and we'll continue to improve and share that with our shareholders," he said.

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