AngloGold CEO Srinivasan Venkatakrishnan
Photo by: Duane Daws
JOHANNESBURG (miningweekly.com) – Gold mining major AngloGold Ashanti generated $71-million of free cash flow in the second quarter (Q2) with production and costs beating guidance on strong performance from its international mines and a recovery in its South African operations.
The company, headed by CEO Srinivasan (Venkat) Venkatakrishnan, reported production of 1.007-million ounces at a total cash cost of $718/oz in the three months to June 30, 2015, compared with 1.098-million ounces at total cash cost of $833/oz in Q2 2014.
The performance beat guidance convincingly with all-in costs (AIC) falling 12% to $1 021/oz.
Venkat has kept cost management as a key driver in the ongoing gold bear market.
While AngloGold boosted the balance sheet with its sale for $820-million of the Cripple Creek & Victor (CC&V) gold mine in the US, the CEO outlined that this would not diminish the company’s focus on improving free cash flow and returns through active portfolio management, capital discipline and unrelenting operational focus.
Its response to lower gold prices has been to cut overhead expenditure by more than two-thirds since the end of 2012 and to lower all-in sustaining costs (AISC) by a quarter over the same period.
AngloGold is now intensifying efficiency efforts to complement the cost benefit it receives from weakening local currencies and plummeting oil prices.
The company's international mines saw AISC 17% lower than the second quarter of 2014 at $844/oz.
The company reported that standout performances were delivered by the Geita and the South American mines in Brazil and Argentina, while the contribution from Tropicana and Kibali reflected their full ramp-up.
Work continues on brownfield project options to extend life, improve production or enhance efficiencies, at the Geita, Serra Grande, Siguiri and Sunrise Dam mines.
Cost management continues to be a hallmark of AngloGold Ashanti's performance.
Whilst cash costs beat guidance by a wide margin, AISC fell by 12% from $1 052/oz in Q2 2014 to $928/oz.
Q2 production was lower compared with the same period last year given the sale of Navachab in June 2014, Obuasi's move to limited operations phase and continued safety-related interruptions in South Africa.
While production from South Africa was lower year-on-year, the mines improved their performance from Q1 with a 9% increase in production.
At Mponeng, where safety-related stoppages over the past year have caused delays in accessing higher-grade ore from the Below 120 Level project, production was 34% higher than the previous quarter.
The improved Q2 performance yielded headline earnings of $26-million, or $0.06 a share in the three months to June 30 this year, compared with a loss of $4-million, or $0.01 a share, in Q4 2014.
Adjusted headline profit of $35-million, or $0.09 a share, was recorded the previous quarter.
Adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) was $391-million, compared with $372-million in the corresponding prior period, despite the 8% reduction in the gold price received and lower production.
The group has introduced two new, low-cost mines in Kibali and Tropicana, sold or closed higher-cost assets and removed unprofitable ounces.
Total Q2 capital expenditure (capex) of $230-million was down on the prior $311-million, with project capex of $63-million.
Net debt fell to $3.076-billion from $3.150-billion and net debt to Ebitda of 1.95 times was down on Q1’s 2.02 times.
Debt levels remain well below the covenant of net debt to Ebitda of 3.5 times and will decline to 1.5 times following the receipt of the cash proceeds on the disposal of CC&V post the quarter end.