AngloGold to pare Brazil portfolio following year-long asset review

Molten gold pour.

ANGLOGOLD Ashanti said today it would look to sell Brazilian mine Córrego do Sítio (CdS)  while another mine in Brazil, Serra Grande could also be sold in time.

This is following a year-long asset review which CEO Alberto Calderon initiated a few months after his appointment in September 2021. The review initially sought to lower cash costs to below $950 per ounce.

“Brazil has not performed for a long time, but we will find a structural solution,” said  Calderon. “Just on scale, it (CdS) doesn’t belong in a company like ours,” he added. Serra Grande was breaking even but the company had an open mind, saying in a conference call with analysts today that the firm might “find a new home for it”.

CdS and Serra Grande account for 158,000 ounces in annual gold production – roughly 5.7% of AngloGold’s total output.

Calderon said he was in “no rush” to sell CdS, but with all-in sustaining costs (AISC) of as much as $3,000 per ounce the mine “punched above its weight” in negative outcomes.

He was commenting following publication of AngloGold’s second quarter and interim results in which it posted a $258m year-on-year decline in basic earnings to $40m. There was a $205m cash outflow for the six months.

AngloGold had a poor first quarter amid rampant inflation which averaged 9%. It helped take AISC 12% higher to $1,587/oz compared to $1,418/oz in the first half of 2022. In addition to higher total cash costs there was a planned increase in sustaining capital expenditure.

“It has been more difficult than expected. We are very surprised,” Calderon said of cost increases this year. He expected inflation to stabilise to about 6% to 7%.

Earnings were also hit by a $103m write-down of assets at CdS and Cuiabá’s Queiroz metallurgical plant. Production was suspended at the facility in February while AngloGold upgraded the buttress at the Calcinados tailings storage facility (TSF). There was also a derecognition for TSFs no longer in use at CdS.

AngloGold also incurred $38m in environmental provisions applied in Brazil. The country has suffered two devastating TSF breaches in recent years. The failure of Vale’s Brumadinho iron ore tailings breach in 2019 claimed the lives of about 270 people and resulted in significant environmental damage.

Commenting on prospects, Calderon said he expected a much stronger second half as indicated by second quarter production of 652,000 ounces compared to 584,000 oz. Asked whether there was upside risk to guidance of 1.45 to 2.6 million oz, Calderon said the group could test the upper range. “There will be a significant increase in the second half performance. I am confident of that,” he said.

CdS is housed in AGA Mineração along with Cuiabá. However, Cuiabá remained a core ‘second tier’ asset in terms of the group’s asset review, said Calderon.

The review identified Obuasi, AngloGold’s Ghana mine, as a tier one asset along with the balance of the group’s other African mines including Geita, Iduapriem and Kibali, which it shares in joint venture with Barrick Gold.

AngloGold announced it would pay an interim dividend of 70 South African cents per share, equal to four US cents a share.