AngloGold Ashanti, the world’s third biggest gold producer, reported flat third-quarter headline earnings per share on Thursday after costs rose, undermining an increase in gold output.
In an interview, AngloGold’s new chief executive officer Mark Cutifani said the firm was reviewing its operations with a view to disposing of assets that did not add value, and also might ”lighten” its hedge book.
The group had launched the review to run until the end of February 2008 to determine the group’s strategy after Anglo American cut its stake in the firm to 17,3% from 41,6%, and its two directors left AngloGold’s board.
”It is very likely that we will dispose of some assets that we believe do not have a material contribution to our business,” Cutifani told Reuters.
”I’m not a great fan of the hedge book, and we are thinking of ways and means to lighten the hedge book in a combination of three or four ways, but in a manner that benefits our shareholders,” Cutifani said.
AngloGold, which has one of the biggest hedge books among its peers, said its net hedge position stood at 10,58-million ounces of gold at the end of September, a jump of 1,83-million ounces from the previous quarter due to a higher gold price.
A near-uninterrupted rise in bullion since 2000 has turned the sector away from hedging in favour of direct exposure to gold’s spot market prices.
AngloGold said adjusted headline EPS for the three months to end-September, excluding non-realised financial effects from derivatives, was unchanged at 29 US cents, ahead of a Reuters average of six analysts who forecast 26,9 US cents.
Gold production for the third quarter rose by 6% to 1,43-million ounces.
Cash costs rose 7% quarter-on-quarter to $357 an ounce due to wage increases in South Africa, higher power tariffs in South Africa and Ghana, firmer prices for supplies, more royalty payments and stronger local operating currencies.
A once-off compensation and recruitment cost for the retirement of former CEO Bobby Godsell and top manager Roberto Carvalho Silva and Cutifani’s appointment also hit earnings.
‘No surprises’
”There were no surprises, the numbers fall in with what the company had given as a guidance, but it’s just the same story of high costs in the sector,” a Cape Town-based analyst said.
Shares in the group added 0,63% to R305,90, against a 0,83% gain in the gold index, and a 0,38% gain in the blue chip Top-40 index.
AngloGold said fourth-quarter gold output would rise to 1,5-million ounces, with cash costs up at $364 per ounce, but earnings for that period would be distorted by annual accounting adjustments for items such as rehabilitation and inventory.
The company, South Africa’s biggest uranium producer, said it purchased 300 000 pounds of uranium at $75 per pund in October so it could meet contractual commitments next year.
”Given the impact of this uranium purchase, rising fuel prices and inflation, total cash cost for the fourth quarter is expected to be around $364/oz,” a statement said.
The company said it bought the 15% minority interest in Ghana’s Iduapriem mine, which it did not already own. – Reuters