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.

The Australian Mining Review - - CONTENTS - REUBEN ADAMS

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.

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