[miningmx.com] – ANGLOGOLD Ashanti (AngloGold) beat production guidance during the September quarter, but that was no thanks to its South African operations where the wheels came off on safety at a with five mineworkers killed across the group’s mines.
Getting South African mine safety back to former standards is crucial according to AngloGold CEO, Srinivasan Venkatakrishnan (Venkat), who added improved production from the South Africa mines was key in the group’s efforts to cope with the weak gold price.
The sharp rise in fatalities – the group’s worst quarterly safety statistics in years – took place during a period when the gold mining groups were involved in intense and difficult pay negotiations with organised labour.
Asked whether this process had contributed to the deterioration in safety standards Venkat replied: “The biggest impact we have identified involves non-compliance to procedure and standards.”
“There does appear to be some correlation with the uncertainty that existed around the wage negotiations but it would be unfair to blame it completely on that.”
AngloGold produced 974,000 ounces of gold during the September quarter beating guidance of 900,000 to 950,000 oz, but production from the South African mines dropped 48,000 oz to 253,000 oz because of safety stoppages.
Venkat said he was looking for a 10% improvement on production from the group’s South African mines in 2016 over 2015 levels and said that achieving this was important to gain the financial benefit on gold sales of the depreciating rand in the current weak dollar gold price environment.
Asked for his views on the gold price Venkat said: “Since 2012, the industry has been running up a ‘down escalator’. The advantage of doing that is it enables you to get fit and be able to exploit the situation when the gold price goes up.
“We are positive on gold in the longer term. Also, don’t forget that every time the US dollar strengthens we are getting compensating benefits across nearly two-thirds of our production in terms of the rand, the Australian dollar and the Brazilian real.
“The trick here is to get the South African production up to enable us to get the full benefit of the rand.
“Our base level planning is that we are working on the assumption of a $1,100/oz gold price over the next 12 months at an exchange rate of R13.60 to the US dollar. We have also put in downside sensitivity metrics to a downswing of between $50 and $150 in the gold price.”
Venkat said that the predicted contraction in newly-mined gold supply which gold mining company executives have long maintained will support the gold price is starting to happen.
“In our case the Obuasi production has gone for the time being. Our production in Mali has come down.
“You are seeing the supply constraints come in but the biggest pinch will come through the slow-down in opening-up new orebodies.
“My peers say it takes anything between 10 to 15 years to open up a new gold mine and that’s starting to come through.”
