[miningmx.com] – SHARES in AngloGold Ashanti gained 4.5% in the first early trade in Johannesburg acknowledging the gold firm’s operational advances for the third quarter in which adjusted headline earnings increased to $110m (Q2:$8m).
All in all, the stock is up 30% since Srinivasan Venkatakrishnan, CEO of AngloGold from April, announced a slew of cost-cutting measures at the group’s second quarter presentation in August. “We’ve ticked boxes, but there’s more to do,” he said today.
The third quarter headline earnings figure adjusts for a non-cash realised fair gain on the company’s mandatory convertible bond as well as other cash items such as $30m in redundancy costs, and corporate retrenchment and termination costs.
The outcome is share earnings of 28 US cents against a consensus forecast of 11 US cents/share. “ANG [AngloGold] remains our top pick from the South African gold majors,” said Avishkar Nagaser, an analyst for Bank of American Merrill Lynch.
However, shareholders may have to wait until the 2014 financial year before the firm considers the resumption of dividend payments, suspended by Venkatakrishnan in August. “I know better than to second guess the board of directors,” he said when asked about the prospect of resuming the dividend.
“We will look at the financial performance and business plan and priorities. We hope to be in much stronger position in 2014,” Venkatakrishnan said.
One of the few negatives for AngloGold Ashanti in the quarter was a 7% decline in the average dollar gold price, but the key figure was a cash inflow of $319m, a more than doubling of the $140m inflow in the June quarter. “Should the gold price surprise us at any time in the next few years we will simply cream that cash flow for shareholders,” said Venkatakrishnan. The cash outflow was reduced 59% to $205m.
Gold production increased 12% to just over 1 million ounces compared to the previous quarter 935,000 ounces. Full year production is forecast to be between 4 to 4.1 million ounces. “Production beat our estimates and consensus estimates by 6% and 5% respectively,” said Eugene King in a note for Goldman Sachs.
Almost all of the group’s regions produced a better operating performance for the September quarter captured in an 11% reduction in the all-in sustaining cost, which includes corporate and exploration expenses, to $1,155/oz.
Commenting on further restructuring in the group, Venkatakrishnan said asset sales would only occur if the company could extract more value than mining the properties itself. “We won’t simply dump assets purely because want to tick the box,” he said.
Plans to sell the Navachab mine in Namibia were progressing. “The process is ongoing. We have narrowed it down to three parties. We are currently working through offers with sale sometime soon,” said Venkatakrishnan.
There were no plans to impose additional retrenchments at Obuasi in Ghana where about 430 employees were retrenched during the quarter. “The [group’s] mine plans will be reviewed in a progressive manner. There are no material cuts for later in the year,” he said.
There are still headwinds however. South Africa’s Associated Mineworkers & Construction Union (AMCU) has not yet accepted the 8% wage increase accepted by the National Union of Mineworkers (NUM). AngloGold Ashanti warned in its third quarter notes that “… production and cost estimates may be impacted by work stoppages in South Africa”.
Said Venkatakrishnan: “We have not received any communication [from AMCU]. We implemented the wage agreement which believe is binding on all unions. We are extending it to all employees”.
