AngloGold Ashanti

After five years in the top job AngloGold chief Srinivasan Venkatakrishnan is leaving for fresh pastures. But he is going out on a high, as the company’s value-building strategies begin bearing fruit in 2018.

SRINIVASAN Venkatakrishnan, who will be succeeded by Barrick president Kelvin Dushnisky in September, used his last AngloGold earnings call in August to celebrate some tenure highlights.

“As you know, this is my final presentation after around 72 quarters with this company, the last 22 as a CEO,” he said.

“I thought I’d reflect on some of the work we have done over that time, to reposition this company, to not only survive the gold price storms that came at us back in 2013, but to also thrive in a range of market conditions.”

Mr Venkatakrishnan said the business had been “significantly de-risked”, with net debt down almost half from its peak – despite the miner self-financing the entire construction of two new mines in Kibali and Tropicana.

“Either way, the stronger balance sheet makes the business more resilient,” he said.

“Over this entire period, we have been delivering a consistent operating and financial performance, meeting our guidance every quarter and every year, in a volatile business environment.”

AngloGold chief operating officer Ludwig Eybers called the last five years “a bit of a journey”.

“From 2013 to 2015, we were really restructuring the way we did business, stripping out waste and duplication, and engineering our CapEx numbers lower without sacrificing optionality,” he said during the August earnings call.

“2016 and 2017 were reinvestment years as we made positive improvements at our key international assets that we believe would yield systemic, long-term improvements.

“And this year, we started to reap the benefits of that long-term approach with the investments starting to yield results.”

A Strong First Half

Savvy inward investment is bearing fruit for AngloGold, which bounced back into profit of $US85m for the first six months of 2018, compared with a loss of $US93m in the first half of 2017.

The company’s balance sheet is also improving with falling debt – down 17 per cent to $US1.786 billion from the same time last year – and ample liquidity of around $US2 billion.

Total group production was lower in the first half – from 1.748moz in H1 2017 to 1.629moz this year – but this included those operations either sold earlier this year, or closed during 2017.

Production from its retained operations was strong at around 1.6moz, up 4 per cent year-on-year.

All-in sustaining costs (AISC) for the remaining assets fell 5 per cent to $US1020/ oz versus $US1071/oz in the first half of 2017.

And Australia – which includes the Sunrise and Tropicana operations – was a major contributor to this performance, with a 20 per cent increase in production over the period.

“Australia is about a fifth of our production and is on a clear improving margin trajectory,” Mr Venkatakrishnan said.

Sunrise & Tropicana: Highlights

Sunrise and Tropicana produced 306,000oz for the half; a big jump on 255,000oz for the year-ago period.

This 20 per cent increase in gold production was largely due to a significant lift in the contribution from Sunrise Dam.

At Sunrise Dam, the strategy to lift mined grade and underground ore production resulted in an impressive 43 per cent increase in gold production to 153,000oz for the first half of 2018 compared to 107,000oz in the same period last year.

This increased production helped reduce total cash costs by 9 per cent to $US888/oz for the half, from $US977/oz in the first half of 2017.

In June, AngloGold successfully commissioned the Sunrise Dam Recovery Enhancement Project (REP) – involving the addition of a flotation and ultra-fine circuit – which is expected to deliver an estimated 8 per cent increase in gold recovery.

Tropicana’s production (AngloGold 70 per cent share) was 153,000oz for the six months ended 30 June 2018, a slight 3 per cent increase compared to 148,000oz in the same period last year.

On the downside, total cash costs at Tropicana increased by 14 per cent to $US655/oz for the half, compared to $575/oz in the same period last year.

This increase was due to “a lesser proportion of waste mining being allocated to capital in the first half of 2018, compared to the corresponding period last year”, the company stated.

During the first half of 2018, concrete works were completed for installation of a second, 6MW ball mill in the Tropicana processing plant; this project is on schedule for completion at the end of 2018.

Sunrise: Exploration Upside

About 20 per cent of AngloGold’s $US130 million annual exploration budget is greenfields-focused; specifically, around Sunrise Dam (WA) and North Queensland in Australia, Minnesota and Nevada in the US, and in Argentina.

AngloGold EVP – Group Planning and Technical Graham Ehm said the remaining 80 per cent was an investment in replacing mineral resources and reserves at its current projects, with a strong focus on the sites with shorter mine lives, based on ore reserves.

“A good example of this is Sunrise Dam, where the reserve life is five years, but the expected mine life is much longer,” he said during the August earnings call.

“Sunrise Dam remains open in all directions to the south, the north and at depth. Aspect for a long life mine is clearly evident.”

Mr Ehm said the team has put in place a clear program to explore and progressively expand the mineral resource at Sunrise and bring these into reserves.

“In this context, one should not judge the mine life of Sunrise Dam by the [current] ore reserve, but by the resources and the endowment potential,” he said.