AngloGold output decline hits shares
Market unhappy, debt down
DESPITE AngloGold Ashanti reducing its net debt by 32 percent in its interim results, the market was disappointed by its decline in production, which led to its share price tumbling more than 5percent yesterday.
Gold has gained 26percent this year as the US dialled back expectations for increasing interest rates, growth slowed in China and the UK’s vote to leave the EU injected fresh uncertainty into global markets.
This has helped AngloGold’s revenue, as did firsthalf weakness in the rand and currencies from Brazil, Australia and Argentina, countries where the company has mines.
AngloGold yesterday reported a net debt of $2.1billion (R28bn) for the six months to June, from $3.076bn last year, mainly as a result of the proceeds received on the sale of Cripple Creek & Victor for $819 million, which was concluded last year, as well as continued strong cost management, which saw improvements across most cost areas.
Improve margins The chief executive, Srinivasan Venkatakrishnan, said: “We will continue to push hard to improve operational and cost performance as well as our overall balance sheet flexibility, regardless of the gold price environment. Our focus remains to improve margins and grow cash flow and returns on a sustainable basis.”
The world’s third-largest gold miner reported a $52m net profit for the period as compared with a $143m loss in the same period a year earlier.
Tony Cadle, a fund manager at Ashburton Investments, said: “The results look good because of the increase in profits, but it was disappointing to see a decline in production of 7percent year on year.
“AngloGold Ashanti achieved these results with the same production numbers of 2015 so it is disappointing in that regard. However, it was encouraging to see the net debt coming down to $2.1bn and we expect the company to reduce it even further. This is important because finance charges also get reduced.”
Gold production was 1.745 million ounces compared with 1.976million ounces, but all-in costs fell to $982 an ounce from $1010 an ounce. The received gold price for the period was $1222 an ounce compared with $1 204 an ounce a year ago.
Sibonginkosi Nyanga, an analyst at Momentum SP Reid Securities, said: “Production was 7percent down and the results were slightly lower than expectations at an earnings level. AngloGold’s attempt to lift gold production in South Africa by 10percent looks like it is at risk due to safety stoppages,” said Nyanga. “The reduction in… debt is positive for AngloGold Ashanti.”
The company is considering resuming dividend payments next year after stopping paying dividends four years ago.
AngloGold Ashanti achieved these results with the same production figures as 2015.
The company said adjusted headline earnings of $159m had more than doubled from $61m generated last year.
South African output had dropped 3percent year on year to 486 000 ounces.
“Production continued to be hampered by increased safety-related stoppages which have become a feature of the country’s underground mining industry,” the company said.
AngloGold added: “The frequent and unpredictable nature of these stoppages created an element of risk to production levels from the region, given the resultant downtime.”
The company was facing some challenges in west Africa where in Ghana; the company said its Obuasi mine, where production had been suspended, was still occupied by illegal miners.
AngloGold shares declined 4.97 percent yesterday to R283.44. – Additional reporting by Bloomberg