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AngloGold Ashanti output up 17%, earthquake-hit mines restarting

11th August 2014

By: Martin Creamer

Creamer Media Editor

  

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JOHANNESBURG (miningweekly.com) – South African gold major AngloGold Ashanti on Monday reported a 17% increase in production for the second quarter compared with the same period a year earlier, with its two new mines continuing to contribute lower-cost ounces, and a strong safety performance helping its South Africa operations improve their contribution.

The overall result for the company showed significant improvement in all key areas.

In the second quarter, compared with the corresponding period a year earlier, all-in sustaining costs (AISC) fell 19% and corporate and marketing costs were down 65%.

AngloGold Ashanti is in the process of safely restarting its Great Noligwa and Moab Khotsong mines, which were halted following a 5.5 magnitude earthquake that originated in the vicinity of the town of Stilfontein, on August 5.

The mines are being restarted in a phased fashion, following evaluation of seismic activity in the area and after thorough inspections of vertical shafts and horizontal underground infrastructure.

Work has been under way over the past three days to complete these inspections ahead of the first production shift, which began on Monday.

Repairs to affected areas and equipment are ongoing.

Based on the inspections to date, ongoing work underground and on surface, and an understanding of the likely power-supply scenarios, and assuming no further tremors affect production, AngloGold Ashanti estimates that the interruption to operations resulting from last week’s earthquake will result in lost output of about 30 000 oz of gold.

This includes downtime at the Mine Waste Solutions surface operation, which was affected by an extended power interruption, and downtime at the neighbouring Kopanang mine, which was taken off line to undertake a precautionary inspection of infrastructure. This estimate of lost production, and the consequential impact on unit costs, may be adjusted higher or lower as our recovery work continues.  

“Safety remains the top priority in restarting these operations as we ramp up production levels, which will take some time to complete,” Mike O’Hare, AngloGold Ashanti’s chief operating officer: South Africa, said. “At no point will safety be compromised.”  

In total, 3 300 people working underground when the earthquake occurred were safely hoisted to surface within seven hours of the event. Twenty-eight people were treated for minor injuries and discharged, while trauma counselling was provided to those employees and contractors who required it. Supervisors at those mines have been trained to identify our colleagues who may be suffering from post-traumatic stress, and to ensure that they receive proper care.  

AngloGold Ashanti is actively involved with local government and civic organisations in providing assistance where necessary as the local community continues to recover from this incident.  

More About AngloGold Ashanti  

AngloGold Ashanti is a global gold producer with 20 operations spanning ten countries. In 2013, it produced 4.1-million ounces of gold at a total cash cost of $830/oz.

In 2013, Moab Khotsong produced 212 000 oz at a total cash cost of $797/oz and Great Noligwa produced 83 000 oz at a total cash cost of $1 100/oz. Together, these two mines affected by last week’s earthquake, accounted for roughly 7% of total group production last year.

Exploration and evaluation costs were 58% lower, capital expenditure (capex) down 44%, all-in costs down 29% and earnings before interest, tax, depreciation and amortisation up 33%.

These results helped turn around a cash burn of $488-million in the second quarter of 2013, to a positive cash flow of $34-million, notwithstanding a $132/oz drop in the gold price.  

“This is another strong result for us, with growth in production and lower costs across the board,” CEO Srinivasan Venkatakrishnan said. “But it’s the continued improvement in safety that we’re most proud of, and where we intend to do better still.”  

No fatalities were reported during the quarter for the third time in AngloGold Ashanti’s history and the first time since 2010. In all, 11 of AngloGold Ashanti’s operations reported no lost-time injuries during the quarter, while eight have kept a clean record for the year. The all-injury frequency rate for the quarter improved 10% from a year earlier to the best-ever level of 6.79 per million hours worked. Records were set on all other key safety metrics.  

Production for the three months to June 30 was ahead of guidance, while costs were at the lower end of the indicated range. Gold production for the quarter was 1.1-million ounces at a total cash cost of $836/oz, compared with 935 000 oz at a total cash cost of $898/oz in the corresponding three-month period of 2013.

In May, AngloGold Ashanti had provided guidance for the second quarter of 1.05-million ounces to 1.08-million ounces at a total cash cost of $850/oz to $870/oz.

AngloGold Ashanti, which plans to grow production this year for the first time in almost a decade, has made significant cuts to overhead costs and also realised significant savings in operating expenditure and capex, as it seeks to improve free cash flow and returns.

The company is investing in a targeted exploration programme and technologies to improve underground productivity on its South African mines, which account for roughly 28% of total production.  

The company reported an adjusted headline loss of $4-million. When adjusted for extraordinary items, such as redundancy costs at its Obuasi mine in Ghana ($27-million) and closure costs of assets including the Yatela mine in Mali ($27-million), the normalised adjusted headline earnings were $76-million, or 19c a share.  

The South Africa region posted production at 319 000 oz, 4% higher year-on-year, at an AISC of $1 064/oz, which was 12% lower than a year earlier. The AISC measurement includes total cash costs, plus corporate and exploration costs and capex required to sustain operations.

AngloGold Ashanti’s international operations posted a 24% rise in gold production to 779 000 oz at an AISC of $1 033/oz, which was 19% lower year-on-year.  

The strong operating result helped drive a 140% improvement in cash inflow from operating activities to $336-million for the quarter compared with the year-earlier period, despite a 9% decline in the gold price.

Edited by Creamer Media Reporter

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