JOHANNESBURG (miningweekly.com) – The price of the shares of South African gold major AngloGold Ashanti rose sharply on Wednesday after the company posted a strong set of results for the third quarter (Q3), which saw earnings rise on a 12% production increase and a 10% drop in total cash costs.
The share price lifted by more than 6% on the Johannesburg Stock Exchange to more than R158 a share.
Gold production for the three months to September 30 rose to 1 043 000 oz at a total cash cost of $809/oz, compared with guidance of 950 000 oz to one-million ounces at $860/oz to $890/oz.
Corporate costs fell by 26% from the previous quarter to $42-million, expensed exploration costs dropped 30% to $55-million and capital expenditure (capex) was 19% lower than the previous quarter. All-in sustaining costs, a standard developed by the World Gold Council to represent the total cost of producing gold at a sustainable level, improved by 11% to $1 155/oz from $1 302/oz the previous quarter.
Normalised adjusted headline earnings, after stripping out one-time items, including retrenchment costs and the gain on settlement of a mandatory convertible bond, were $110-million compared with $9-million for the second quarter.
JSE- and NYSE-listed AngloGold Ashanti responded swiftly to a sharp drop in the gold price this year, cutting unprofitable ounces from its production base, optimising its capex and enhancing efficiency by slashing waste and improving its mine plans.
JP Morgan gold analyst Allan Cooke praised the “very good” quarterly results and Investec Asset Management portfolio manager Daniel Sacks said in a note that AngloGold had clearly pleased the market.
But both queried the sustainability of keeping grades high, which had been a significant factor in the good Q3 results.
The company has led a drive since the appointment of new CEO Srinivasan Venkatakrishnan (Venkat) in May, to realise targeted cuts of $460-million from corporate and exploration costs, $500-million from direct operating cost savings and also to reduce capex after two new projects poured their first gold in September.
“We’ve delivered a decisive response to the lower gold price with all operating regions showing better production and we’ve seen cost improvements at every level,” Venkat told Mining Weekly Online. “We’ll continue driving hard to build on these early successes.”
The Tropicana mine, in Australia, and the Kibali mine, in the Democratic Republic of Congo, both produced their first gold in the last week of September, ahead of schedule and within budget.
Together, these two mines are expected to contribute production of between 550 000 oz to 600 000 oz next year at total cash costs below our current average.
While these are expected to further improve AngloGold Ashanti’s overall cost profile, the company will look to continue removing unprofitable ounces from its production base in order to further improve free cash flow generation.
AngloGold Ashanti also reported a record safety performance with an all-injury frequency rate of 6.65 for every million hours worked.
There were no fatalities reported at the deep South African underground gold mines during the quarter, and the Vaal River Operations maintained their record safety performance, with more than 14 months since its last fatal accident.
Adjusted headline earnings for the third quarter were $576-million, compared with a loss of $135-million the previous quarter.