Free cash rockets to $278m, dividend resumed – AngloGold

JOHANNESBURG (miningweekly.com) – Gold mining company AngloGold Ashanti will resume dividends after lower operating and interest costs helped it nearly double free cash flow to $278-million on lower production. In the 12 months to December 31, AngloGold Ashanti produced 3.6-million ounces of gold across its 17-mine portfolio at a total cash cost of $744/oz, compared with the higher 3.8-million ounces at $712/oz in the prior year.

Production was hit by weaker output from safety-stoppage-hit South Africa mines, lower grades from Kibali in the Democratic Republic of Congo (DRC), a planned decrease in head grades at Tropicana in Australia and Geita in Tanzania, and no production contribution from Obuasi in Ghana.

 Both the Mponeng and Moab Khotsong gold mines in South Africa upped production over the prior year, along with Iduapriem in Ghana, Siguiri in Guinea and Sunrise Dam in Australia.

Mponeng, where a brownfield expansion feasibility study is expected to be concluded towards the middle of next year, upped production by 16% and cut all-in sustaining costs (AISC) by 14% year-on-year.

The JSE- and NYSE-listed company, under CEO Srinivasan ‘Venkat’ Venkatakrishnan, has since 2013 used self-help measures, including asset sales and efficiency improvements, to reduce debt and improve balance sheet flexibility, without diluting shareholders.

It continues to prioritise inward investment in brownfield projects over acquisitions, as it seeks to improve the quality of its production base and extend mine lives.

 Overall AISC were $986/oz, up from $910/oz in 2015, with proven and probable gold reserves of 50.1-million ounces at year-end offsetting depletion during the year.

 Six operating fatalities were recorded in South Africa during 2016, where a fatality-free fourth quarter was achieved across all business units, made up of one million fatality-free shifts at Mponeng, Kopanang and Moab Khotsong and two-million fatality-free shifts in the Vaal River region.

Moab Khotsong achieved a full calendar year without a fatality in September and the Surface Operations unit achieved a full year with no lost-time injury.

Production for 2017 is being guided at potentially up to 3.755-million ounces, with total cash costs of $750/oz at the low end and AISC of $1 100/oz at the high end.

Capital expenditure of not more than $1. 050-billion is anticipated, with reinvestment at the Cuiaba gold mine, in Brazil, where a greater rate of ore reserve development is expected to improve mining flexibility; at Iduapriem to strip waste rock from the Teberebie orebody to extend mine life and lower cash costs; at Geita, to replace the mine’s original 20-year-old power plant to ensure reliable electricity supply and also continue the ramp-up of underground production in advance of depletion of openpit ore in future; at Sunrise Dam, in Australia, where investment in plant modifications is expected to improve gold recoveries; and at Kibali, where additional ore reserve development will be conducted ahead of a production ramp-up.

There was lower capital spend than initially planned in South Africa, where the small-range reef boring innovation programme was discontinued and the Sandvik/Cubex machine decommissioned at the Savuka section of the mine, owing to stage-gate review challenges.

AngloGold Ashanti chief operating officer South Africa Chris Sheppard assured Mining Weekly Online during a media conference that the efforts of the innovative Mark III and Mark IV high-technology machines were continuing according to plan.

These machines are being developed to improve the economics of gold mining in South Africa’s low-height, hard-rock reef.

“We still have our stage gates in place. Our research and development programme is still on track and I’m still upbeat about our reef-boring component on the Mark IV machine,” Sheppard told Mining Weekly Online, adding that the Mark IV had bored four holes this quarter, achieving 90 hours per hole, compared with the benchmark of 72 hours per hole, and the initial eight to nine days per hole.

“The key issue outstanding is that we are not on a 24/7, and that 72 hours productivity level is based on being able to operate the machine on a 24/7 basis, which we don’t have at present,” he said.

When it comes to South Africa’s  brownfield expansion options, Mponeng remains the option of highest potential.

Sheppard said in response to Mining Weekly Online that a prefeasibility study had been concluded at Mponeng on the original Phase 2 project, which has resulted in the phased approach being rejected and a consolidated approach being adopted.

He said that both the carbon leader reef and the Ventersdorp contact reef would be pursued below the current Phase 1 project.

It entailed moving away from a phased ramp-up based approach to that of a sub-shaft deepening approach to realise a better investment proposition.

“We’re currently in feasibility study and that will be concluded around the middle of next year,” Sheppard said, adding that the company was continuing with critical path activities in order to preserve value of the investment case.