[miningmx.com] – ANGLOGOLD Ashanti slashed its capital expenditure
bill $200m and said it would conduct a broad review of its projects as it sought to
protect its balance sheet amid a credit downgrade and lost production.
On October 17, Standard & Poor’s put AngloGold on a negative watch based on the
agency’s country risk assessment that was informed by a spate of wildcat strikes in
South Africa that subsumed all of AngloGold’s South African mines in that month.
Mark Cutifani, CEO of AngloGold, said that although the strikes had not changed the
group’s strategy regarding South Africa, it had become necessary to protect the firm’s
balance sheet. “We have to manage every discretionary dollar,’ he said. Capital
expenditure for the year would come in at between $2bn and $2.1bn.
Strike action in South Africa was expected to reduce production 250,000 ounces –
enough to imperil the group’s overall 4.3 to 4.4 million oz target.
“We won’t make the full-year guidance,’ said Cutifani, who added his executive team
was now reviewing all its South African projects, including the $416m expansion at
Mponeng and the $395m Zaaiplaats second phase expansion.
The project review also extends to Mongbwalu, in the Democratic Republic of Congo,
and the Sadiola Deep development project which is being slowed.
“Production plans are being reviewed to focus the existing operations on higher-
margin, higher-quality operations,’ the company said in its third quarter
announcement. Details would be provided in the fourth quarter, it said.
Production in the third quarter came in 3% lower at 1.03 million ounces with the
firm’s Ghana-based Obuasi also under-performing. Lower production resulted in cash
costs at the high end of AngloGold’s previous guidance.
The outcome was attributable profit of just over $235m, equal to 61 US cents/share
compared to $457m or 118c/share in the third quarter of 2011.
As a result, AngloGold halved the dividend to 50c per share quarter-on-quarter, and
guided for a similar payout in the fourth quarter provided there were no more
disruptions. Currently, there is a sit-in by workers at the Mponeng mine that is
preventing any mining.
Cutifani had stern words for potentially disruptive forces at the mine, saying they had
“better know’ that violence and disruption would not be tolerated and that the “keys
would remain firmly in the draw’ while the protest continued, thought to relate to
payment of a safety bonus.
Despite the warning, Cutifani said he was hopeful of a resolution at Mponeng in the
coming days.
PRODUCTIVITY
Cutifani warned of significant job losses in the South African gold industry if an
arrangement couldn’t be made to link above-inflation wage increases to productivity.
“We have to change the nature of the structure,’ he said, adding that a working year
of 340 days rather than the current 270 days would have to be implemented.
Commenting on the planned review of the South African assets, which he said would
take between two to four months, Cutifani said it was necessary to protect its high
quality ounces in order to fund the extension of South African production.
However, he dismissed the notion that AngloGold would consider spinning off the
South African assets into a separately-listed organisation. “The strike won’t change
our strategy in South Africa,’ he said.
