AngloGold Ashanti, the last of South Africa’s big gold mines to report on its March quarter, had its usual slow start-up at home, but showed good signs of finally getting to grips with the Ghana and Mali-based assets it acquired through Ashanti. It also made good headway in Argentina.
Mining gold in no fewer than 10 countries — South Africa, Argentina, Namibia, Australia, Tanzania, the United States, Ghana, Mali, the Republic of Guinea and Brazil — the group has to deal with a wide range of currencies, cultures and ways of doing business.
In South Africa, which these days accounts for less than 50% of total group production, the first quarter is always affected by the Christmas-New Year break. It’s become a given.
However, it was not only this annual break that led to local production being 12% lower than in the fourth quarter of last year. Seismicity problems at Tautona and reduced face advancement at Great Noligwa were also to blame.
Good news for the group, which has for several quarters been grappling to bed down the assets it acquired from Ashanti, was improved output performances from Obuasi in Ghana and Yatela in Mali.
Illustrating that geographic diversification can sometimes be a big positive, the group’s star performer for the quarter was undoubtedly the largely unheralded Cerro Vanguardia mine in Argentina, which cranked up its output by no less than 21% compared with the December quarter.
Overall, AngloGold Ashanti’s output throughout its international operations fell by 10% to 1,33-million ounces compared with the fourth quarter of 2006, but the group expects output to rise to 1,39-million ounces in the June second quarter. It also expects cash costs to fall to $325 an ounce from $332/oz in the March quarter.
This drop in costs is dependent on certain exchange-rate assumptions across the various currencies in which it operates. It is basing its rand assumption on R7,30 to the dollar.
For the full year to end-December, the group is expecting output of 5,7-million ounces at an average cash cost of $320 an ounce. Again, this depends on certain currency assumptions, with the rand averaging R7,32 to the dollar.
Significantly, the group said its delta hedge reduced by 570Â 000 ounces to 9,59-million ounces during the March quarter. The group holds the view that gold producers will remain net de-hedgers in 2007, a factor that should be supportive of the gold price.
Gold Fields earlier this year bought back Western Areas’ 1,2-million ounce hedge and Lihir Gold recently announced the closure of its 934Â 000-ounce hedge book.
On the earnings front, AngloGold Ashanti’s first quarter cannot be directly compared with the fourth quarter of last year, which was significantly affected by a one-off accounting adjustment.
Nevertheless, adjusted headline earnings of $97-million for the quarter was roughly in line with analysts’ expectations and lays a good foundation for the full year.
In a conference call for media and analysts, CEO Bobby Godsell stressed that cost control was a major focus at all of the group’s operations and that a safety review had been conducted and was already bearing fruit. Four of the South African mines in the group boasted no lost time through injuries during the March quarter.
On the gold price that AngloGold Ashanti is likely to receive going forward, he said that assuming a spot price of $600 to $700 an ounce, the group’s overall received price was likely to be 8% to 10% below spot as it continued to settle maturing hedge contracts.
On the gold price itself, Godsell intimated that consumers appeared to be getting used to gold being at a higher level, a factor that would be important in underpinning a bright outlook for the metal. — I-Net Bridge