[miningmx.com] – ANGLOGOLD Ashanti suspended dividend payments amid its first net loss since it sported an out-of-the-money multi-billion rand hedge book, and said it would strip out corporate, capital, exploration and operational costs totalling as much as $482m – a saving equal to $100 per ounce.
This follows a dramatic 25% decline in the dollar gold price in the second quarter – the highest quarterly decline since modern day gold trading began in the Seventies – which precipitated a write-down of $2.4bn of AngloGold Ashanti’s assets.
The outcome was a second quarter adjusted headline earnings loss of $135m (Q2: $270m profit). Excluding the exceptional items, AngloGold Ashanti recorded a slight profit for the quarter.
On an interim basis, the company has recorded a $740m swing in fortunes year-on-year with a six month loss of $23m for the 2013 financial year compared to a $716m profit in the 2012 financial year.
Shares in AngloGold Ashanti fell 3.67% in early trade in Johannesburg striking a new 5-year low of R117.50/share.
Srinivasan Venkatakrishnan (Venkat), CEO of AngloGold Ashanti since the second quarter, said it was difficult times for the company “… with more difficult quarters to come”. As a result, AngloGold Ashanti would revert to half-yearly dividend payments which rules out a third quarter payout.
The final dividend would be reviewed, but it had been deemed “prudent” ahead of commissioning the group’s capital projects Kibali and Tropicana – ventures that are expected to add 550,000 to 600,000 ounces in the 2014 financial year.
AngloGold Ashanti initiated a cost-cutting programme whilst still under the control of its former CEO, Mark Cutifani, in which Continental Africa projects such as the Sadiola expansion in Mail and the Mongbwalu project in the Congo were put on hold. That was before the major gold price decline, however.
Further to these cut-backs, Venkat said capital expenditure for 2013 was expected to be between $100m to $150m lower owing to the suspension of projects such as Zaaiplaats at the Moab Khotsong mine in South Africa.
Venkat said the group was also half way through corporate cost cuts totalling $120m to $140m, enough to see roughly 40% of employees not directly involved in mine site related activities taking their leave of the group.
From the perspective of All-In Sustaining Costs, which includes corporate and exploration costs, but excludes large capital costs, the group had a break-even of $1,300/oz in the current quarter, but hoped to narrow this to $1,000/oz during the 2014 financial year.
The balance sheet was deemed to be robust owing to the raising of a $1.25bn bond which removes the need for refinancing of existing debt. The over-subscription of the bond also raised an additional $500m which added to $300m in cash on hand meant the group had good liquidity. “This doesn’t mean we are going to spend the cash,” said Venkat.
Venkat said that while the company was “optimistic” in the medium to long-term on the gold price, it was nonetheless planning on a $1,100 per ounce gold price.
From a production perspective, AngloGold Ashanti had a decent second quarter performance with gold output some 4% higher at 935,000 ounces, mostly owing to a positive swing in production from the Continental Africa mines such as Obuasi in Ghana and Geita in Tanzania.
However, Venkat said the group would look critically as its assets and was assessing the possibility of selling less profitable or unprofitable assets. Outside of Namibian mine Navachab, which AngloGold said it would sell earlier this year, no particular asset had been identified as yet.
“We have to be realistic about asset sales. This is not a sellers’ market and we don’t want to give away value just because we are in panic mode,” said Venkat.
