South African mines hold back AngloGold’s first-half production


South African mines hold back AngloGold’s first-half production

Published Date: 2017-08-22 | Source: Stephen Gunnion | Author: Stephen Gunnion

South African mines hold back AngloGold’s first-half production

Provisions for retrenchments and a silicosis lawsuit push the miner into a loss

AngloGold Ashanti's South African operations have detracted from a positive first-half at its other mines across the globe. Production for the first six months of 2017 was barely higher than a year ago, despite a 25% jump in production at its Siguiri mine in Guinea and solid performances from Iduapriem in Ghana, Kibali in the Democratic Republic of Congo, Tropicana in Western Australia and Brazil's AGA Mineração.

Total production for the half reached 1.748Moz from 1.745Moz a year earlier. It blames slow production in South Africa, where it also faced redundancy costs and impairments over the period. However, it says after underperforming in the first quarter of the year, second-quarter production increased by 11% to 918 000oz from 830 000oz in the first quarter.

Cash costs are also on the rise, with all-in sustaining costs of $1 071/oz in the six months to end June, from $911/oz in the first six months of last year. It says this reflects the impact of stronger operating currencies, lower grades, cost inflation and the planned increase in sustaining capital expenditure. The rand and Brazil's real were, on average, 14% stronger than a year earlier.

Adjusted earnings before interest, tax, depreciation and amortisation were 22% lower at $610 million. It's reported an adjusted headline loss of $93 million, which includes a retrenchment provision of $47 million and a provision of $46 million for a class-action lawsuit brought against mining companies for workers who contracted silicosis and tuberculosis on their mines.

The company says it's taken decisive action to stem losses in South Africa and restructuring talks are underway. It's been reported that AngloGold could lay off up to 8 500 workers at its operations in Matlosana and Carletonville as part of the restructuring.

Encouragingly, the company says it's had three back-to-back quarters with no fatal accidents at any of its operations, including its ultra-deep South African mines.

It's still aiming for full-year production of between 3.6Moz and 3.75Moz at all in sustaining costs of between $1 050/oz and $1 100/oz. That depends on how exchange rates and the oil price perform for the remainder of the year though.

Shares in AngloGold fell 2.6% to close at R134.67 yesterday.

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