ANGLOGOLD Ashanti CEO, Srinivasan Venkatakrishnan, said he had “high expectations” that discussions with the South African government would result in a modified version of the draft mining charter.
“I have got high expectations as the draft charter doesn’t work for the industry. I am quite confident we will see a modified version of the charter post these negotiations,” he said.
The South African government surprised its mining sector on April 14 after it gazetted a new version of the mining charter which called on firms to always ensure 26% of their shares were held by previously disadvantaged South Africans.
Mines minister, Mosebenzi Zwane, subsequently extended the 30-day public consultation period previously allotted to the process following industry concern that passing the charter into legislation was tantamount to ‘economic suicide’.
Venkatakrishnan could not expand on his expectations as the government and the Chamber of Mines had agreed to keep discussions confidential. “Once concluded, you will hear from the chamber,” he said.
Responding to questions following publication of the R99.5bn company’s March quarter figures, in which pretax earnings fell $24m to $378m year-on-year, Venkatakrishnan also expressed his dismay at the ongoing invasion of illegal mining at the Obuasi mine in Ghana.
AngloGold Ashanti announced to the Johannesburg Stock Exchange last week that it had sought international arbitration in order to save operations at Obuasi following a deterioration in security at the mine, situated in Ghana.
In its statement, AngloGold said a request had been filed with the Washington-based International Centre for Settlement of Investment Disputes (ICSID) on May 2.
Asked by Miningmx why the Ghanaian government had relaxed security at Obuasi, Venkatakrishnan said: “We are at a loss to explain it”. AngloGold said last week that it had engaged two government ministers and other high-ranking officials in the Ghanaian government without success.
Hundreds of illegal miners flooded into the mine in February after the Ghanaian government withdrew army forces from the property. Venkatakrishnan said there was still some security at the mine but it was insufficient to keep the illegal miners at bay.
AngloGold announced last year that it would place Obuasi into mothballs after attempts to restructure the operation in the past had failed to make it profitable. It wants to recapitalise the mine into a smaller operation on a joint venture basis with another company.
“We have acted honourably throughout the [restructuring] process,” said Venkatakrishnan. “All we want is law and order, peace and quiet. I don’t wish to speculate on the future,” he added.
March quarter
AngloGold said its full-year guidance for production and all-in sustaining costs (AISC) was unchanged after the March quarter in which output fell to 861,000 ounces from 997,000 oz in the December quarter.
The March quarter is historically a weak production period owing to interruptions from year-end holidays. However, AngloGold also suffered the effects of stoppages related to safety problems resulted in the loss of some 21,000 oz. Output was also lower at Kibali, the Democratic Republic of Congo mine AngloGold shares with Randgold Resources.
The group has forecast production of between 3.6 million oz and 3.8 million oz for the 2016 financial year. Cash costs were expected to be between $680/oz to $720/oz and AISC of between $900/oz to $960/oz. The forecasts assumed a rand and Brazilian real of 15 and 4 the dollar respectively.
Production was lower year-on-year owing to the sale of AngloGold’s Cripple Creek & Victor mine to Newmont Mining and the closure of Obuasi.
Although pretax earnings were lower, AngloGold generated free cash flow for the first quarter of $70m, compared to a free cash outflow of $40m in the first quarter of 2015. This enabled the group to make further incursions into net debt which stood at $2.13bn at the March quarter end compared to $2.19bn in the previous quarter.
“We again generated significant free cash flow despite the lower gold price, which shows the continued success of our self-help measures to reduce debt by improving margins,” said Venkatakrishnan in notes to AngloGold’s published figures.
“AngloGold continues to deliver operationally, and we believe the company is well positioned to benefit from the current high ZAR-gold price,” said Johann Steyn, an analyst for Citi. “It remains our most favoured SA gold stock,” he said.
Goldman Sachs, however, described the results as “slightly disappointing” as production and free cash flow were below its own forecasts for the quarter.
