JOHANNESBURG (miningweekly.com) – South Africa Incorporated needed to thrash out a workable, collective solution to its electricity pricing issue, which, together with the strong rand, was putting the country's future employment capacity at significant risk, AngloGold Ashanti CEO Mark Cutifani said on Monday.

Cutifani told Mining Weekly Online, after AngloGold Ashanti presented results that showed the company's South African operations to be under greater competitive pressure than its operations in South America and elsewhere in Africa, that South Africa needed to come together and seek solutions across a range of options.

"We've got to do it together, we're all in this together, and ultimately it's the future of the country that's at stake," said Cutifani, who added that electricity prices and rand strength were "very serious" issues and needed to be taken "very seriously" by all.

Cutifani gave notice that AngloGold Ashanti would be accelerating the restructuring of its South African operations, "as a necessary step to make sure that we remain profitable and ensure long-term viability for the South African operations".

Based on the discussions with the South African government, Eskom and labour unions, Cutifani believed that South Africa could find at a pathway to the right sort of solutions.

There was no doubt that the team under Eskom chairperson and former AngloGold CEO Bobby Godsell was "very open" to discussion.

"We would like to think that there are other options that can be looked at and certainly we will be putting forward ideas in work with both Eskom and the government and all other stakeholders in making sure that we keep South Africa as competitive as it can be and we protect employment, because that's ultimately what this is all about."

On cutting electricity consumption, Cutifani said that AngloGold Ashanti had reduced its power consumption by 16% and was operating at 84% of the power consumption of two years ago, which had won the company an Eskom energy efficiency award.

The AngloGold Ashanti corporate office had reduced its power consumption by 33%.

"I would love to see the country commit to something like daylight saving in terms of how we can help to manage our power consumption over a full-year basis, and those sorts of steps are needed to help change behaviour in relation to energy use.

"Not only does daylight saving give you a better chance to manage consumption on a full-year basis, but provides a changed psyche," he said.

On currency strength, Cutifani said that a broad spectrum of South African industry was heavily reliant on the competitiveness of the rand, which seemed to be a lot stronger than it should be, given South Africa's 24% unemployment level.

He was "very worried" that rand strength would ultimately result in a "hollowing out of industry if this sort of rand remains where it is".

The South African mining industry, which represented 18% of gross domestic product, was having to restructure itself as a better performance from AngloGold Ashanti's African operations and an excellent South American performance was re-emphasising South Africa's need to deliver.

AngloGold Ashanti had been forced to crank down its production guidance for the fourth quarter because of operational risk in South Africa, where the TauTona gold mine was having to be shut for two months as shaft steelwork was replaced in the interest of safety.

Fortunately, the fundamentals for gold industry remained very strong: "If I were given a choice between a US dollar, a Euro, an English pound, an Aussie dollar, I'd take an ounce of gold any time," Cutifani said.

The price was likely to remain from $1 000/oz to $1 100/oz in the short term and could go far higher in time, depending on the US dollar.

Turnaround at the Geita mine in Tanzania and fewer safety-related interruptions at its Vaal River operations in South Africa had enabled AngloGold Ashanti to increase its production by 5% in the September quarter, when overall production rose to 1,187-million ounces, broadly in line with the company's guidance.

AngloGold Ashanti said that it would produce from 4,55-million to ounces 4,6-million ounces for the full 2009 year at cash costs of from $515/oz to $530/oz.

Cash costs for the September quarter were $534/oz.

AngloGold Ashanti's wholly owned Brazilian operations delivered a 23% increase in production to 90 000 oz and, despite the stronger currency, are now the lowest-cost assets in the group at $333/oz. Cerro Vanguardia, in Argentina, is the next best performer with production of 47 000 oz at $333/oz.

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