Inflation denies AngloGold spectacular showing that higher grade normally assures

AngloGold Ashanti CEO Alberto Calderon.

AngloGold Ashanti CEO Alberto Calderon.

4th November 2022

By: Martin Creamer

Creamer Media Editor


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JOHANNESBURG ( – Higher grade ore mined by AngloGold Ashanti in the third quarter should have meant more gold at unchanged cost – more bang for the same buck, as it were.

But the current abnormally high level of inflation knocked back the potential benefits of 17% higher underground grades and 21% higher opencast grades year-on-year.

Inflation contributed 14% to the total cash cost of $996/oz reported by the Johannesburg- and New York-listed company in the three months to the end of September.

“You can see how damaging inflation is to the world because if we had normal inflation, we would have had an unbelievably spectacular year,” AngloGold CEO Alberto Calderon, a former International Monetary Fund luminary, said in response to questions put to him by Mining Weekly during Thursday’s media roundtable.

The higher grade and increased production did manage to stave off inflation’s full potential impact.

Total cash costs were $966/oz, with the year-on-year increase contained at 4%, or $39/oz, despite inflationary pressure and other noncontrollable factors of $112/oz.

“The cost environment remains dynamic and uncertain, and we continue to expect full year cash costs at the top end of our guidance range,” AngloGold interim CFO Ian Kramer reported.

“Labour markets remain tight. We currently see inflation averaging around 7% next year,” said Kramer in noting that input commodities have trended sharply upwards following the outbreak of the Russia/Ukraine war.

In addition to inflation, total cash costs were impacted by volume variances of $29/oz and activity changes of $42/oz. These upward cost pressures were partly offset by favourable ore stockpile movements of $39/oz and the positive impact of higher grades at $135/oz.

The inflation impact on AngloGold is from the suppliers it buys from but the cash cost increase has been limited to around 4%, based on a more predictable operational performance with higher grades and a significant drop in stockpile.

All-in sustaining costs were down 6% to $1 284/oz, mainly owing to lower sustaining capital expenditure of $103/oz, partly offset by the $39/oz increase in cash costs.

AngloGold’s primary goal is to regain its cost competitiveness compared with its peers.

Its new carbon emissions reduction programme, which is expected to add value to the business by reducing energy cost, is described as being net present value (NPV) positive.

Mining Weekly: To what extent is your carbon emission reduction programme likely to lower your energy costs?

Calderon: When we talk about the overall programme being NPV positive, that is derived precisely from paying less for our energy. Take, for example, our very advanced system in Tanzania, it’s going to be a combination of hydro and gas that will reduce the emissions by a significant amount, I think it’s by 30%, and it will also cost us less. That is typical of being NPV positive. But we are doing this because it’s the right thing to do and it just happens to be NPV positive. At Geita, you will see the benefits next year, at others in 2024 and some only in 2027, 2028.

Co-funding of your $1.1-billion renewable energy projects has lowered your own funding to a manageable $350-million. How is that brought about?

How that works – and this is just standard in the industry – is that a lot of the programmes involve mining companies doing a power purchasing agreement where we commit to buy the energy over a period of time, let’s say ten years, as is happening with us in Australia. Those who provide the service put in the capital, which occurs in about 70% of the cases. What is interesting is that there is a lot of money in the world for these types of projects at, I would say, below market rates. Ian [Kramer] has already started looking for funding that will be below normal loan operation and that’s all factored into the NPV estimates.


As has been reported earlier this year, AngloGold has appointed Gillian Doran, 45, as its new CFO from January 1.

Doran joins from Rio Tinto, where she is CFO Aluminium, based in Montreal, Canada.

One of Doran’s attributes that has impressed is the way she reportedly partners with the operations, in her current case, low-margin aluminium operations, where understanding of controllable and uncontrollable variables is key.

She is noted for her economic interpretation rather than ringfenced accounting interpretation “and I think we can do better at that”, said Calderon.

Edited by Creamer Media Reporter



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