Signs Calderon efficiency drive is taking hold after AngloGold posts strong production quarter

Alberto Calderon, CEO, AngloGold Ashanti

ANGLOGOLD Ashanti reported strong year-on-year production and cost control for the third quarter, suggesting the efficiency drive implemented by Alberto Calderon – CEO since July last year – is beginning to take hold.

Production increased a fifth to 738,000 ounces driven by the recovery in output at the group’s Ghana mine, Obuasi. It contributed towards a containment of total cash costs that were 4% higher year-on-year at $966/oz.

All-in sustaining costs improved 6% year-on-year to $1,284/oz in the third quarter of 2022, from $1,362/oz in the third quarter of 2021.

Responding to media questions today, Calderon said input inflation was running at about 14% but that the company had done “reasonably well”. But he warned further inflation was “still coming” in 2023 and would put pressure on the group’s cash costs. “I don’t know what’s going to happen. Let’s see next year,” he said.

Set against this Calderon implemented a mine-by-mine review in an effort to force down cash costs to sub-$900/oz.  This compares to AngloGold Ashanti’s 2022 guidance of $925 to $1,015/oz. As of the third quarter, Sunrise Dam in Australia and Siguiri in Guinea had undergone the process. Calderon said there was potential to lower Siguiri’s cash costs about $100/oz by 2025 as a result of the review.

Adjusted EBITDA increased 5% to $472m in the third quarter of 2022, from $448m in the third quarter of 2021, despite the lower gold price received. The company recorded free cash flow of $169m in the third quarter of 2022, versus $17m in the third quarter last year.

Free cash flow totalled $169m in the quarter compared to a $17m outflow last year but it could have been better. A total of $148m in cash is locked up in unpaid dividends in Argentina where AngloGold Ashanti operates the Cerro Vanguardia mine. Applications for the payment of $79m for the 2019 and 2020 financial years had been submitted and a further new application of $54m was made in the current quarter.

Cash conversion has been an ongoing theme for AngloGold ever since it encountered similar problems in the Democratic Republic of Congo where it operates the Kibali mine in joint venture with operator, Barrick Gold.

AngloGold Ashanti paid a 29 US cents per share first half dividend and cut debt after finally receiving $549m in outstanding profit share from Kibali. In the third quarter, the company received $71m in cash from the Kibali and had $50m share still due up $41m. Payments from Kibali total $620m in the nine months ended September.

The group wrote down its investment in the Córrego do Sítio mining complex in Brazil totalling $151m ahead of its sale. Calderon said in a media call on Thursday morning there had been interest in the operation but there were other alternatives including closure. An update on the future of the mine would be provided in the first quarter of 2023.

In terms of outlook, AngloGold Ashanti reiterated production guidance of 2.55 to 2.28 million oz at AISC of $1,295 to $1,425/oz.