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AngloGold facing crossroads Posted: Thu, 07 Feb 2008 [miningmx.com] -- ANGLOGOLD Ashanti, the world's third largest gold producer, raised the prospect of sweeping operational changes at its South African mines in an effort to cope with a 10% drop in power supply from Eskom, the country’s power utility. Mark Cutifani, AngloGold Ashanti CEO, said the company may need to close one mine, halve another’s output, and curtail the production of gold from its above ground dumps, which it retreats. Robbie Lazare, head of African operations, said the company is still building up production after the mine shut down in January amid the first major effects of so-called load sheading by Eskom. "We are in talks with unions and employees,” said Lazare of the urgent power shortage. “What we need from Eskom is to ensure we at least get a consistent 90% power supply. Below 90% (power supply) rapidly doubles the potential gold loss," he said. AngloGold's South African mines have a back-up power system to be able to get people out in case of an outage. AngloGold said 34 people died at their operations in 2007. Gold Fields and Harmony have already said that the power shortages could potentially lead to a combined the loss of 1000s of jobs across their operations. "We do not want to speculate about number of jobs that could be lost,” said Steve Lenahan, AngloGold Ashanti spokesman. “We think there are a number of steps which could be taken before it comes to that.” Lower production Cutifani said the power situation is the "most urgent and immediate concern for the management team. The story is still evolving … there have been fluctuations (meaning Eskom has been unable to supply 90% of the power) but the last four days had a more stable supply". For 2008, AngloGold is expecting to produce between 4.8 million oz and 5 million oz of gold at cash costs ranging from $425/oz to $435/oz, based on currency assumptions to the US dollar of R7.35/$, A$/$0.88, BRL1.81/$ and Argentinean peso 3.10/$. In the final quarter of the year AngloGold recorded a loss of R3.2bn, or R11.36/share, from R2bn, or R7.12/share in the previous quarter, adjusted headline earnings were $82 million. This comes at a time when it was receiving a rand gold price of R149,312 oz. Gold output in the quarter fell 5 % to 1.37 million ounces after safety stoppages and operating problems at Geita in Tanzania, said AngloGold. The average gold price received in the quarter was $687/oz, 14% lower than average gold spot price because AngloGold has to deliver into its hedge book. Cash costs in the final quarter were $404/oz mainly because of lower production but AngloGold said it also had to buy uranium to fulfil contracts. AngloGold Ashanti's full-year gold output fell 3% to 5.48 million ounces while total cash cost rose 16% to $357/oz. Headline earnings for the company's financial 2007 were $278m. "We have a great deal of work to do on our operational and cost performance. We are focused on putting specific plans in place to improve performance throughout our assets, in particular where recent performance has been unacceptable," Cutifani said. Crossroads The company is still having difficulties at its Obuasi mine in Ghana and Geita in Tanzania has put in an abysmal performance, production fell 47%. Cutifani is shaking up operations at AngloGold. Click Here to subscribe to our daily newsletter
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