AngloGold Ashanti Results for the Quarter and Year Ended 31 December 2004
|Thursday, January 27, 2005
|Key features for the quarter:
Key features for the year:
- Generally sound operating performance
- Hedge book restructured to give greater exposure to spot gold price and to improve value of future forward sales contracts
- Production increased by 4% to 1.699Moz
- Total cash costs¹ increased by 2% to $278/oz, largely due to a further weakening in the dollar
- Total cash costs¹ in South Africa reduced by almost 2% in rand terms to R59,541/kg
- Adjusted headline earnings² improved from $43m to $110m, of which $59m was as a result of a change in the estimated deferred tax rate.
Commenting on AngloGold Ashanti's performance, CEO Bobby Godsell said: "Against a background of a generally sound operating performance, three things characterise this quarter. First, our best-ever safety performance - for the quarter and indeed the year - which is testament to the hard work of all our operating teams, and is an indicator to me that our employees are focusing on the right things in the right way. Second, the continued significant reduction of our hedge book, together with restructuring of remaining contracts, so as to increase the proportion of production exposed to the spot price going forward while also improving the value of forward sales in the book. Third, there is the continuing underperformance of the Ashanti assets. We have interventions under way to address this and I am confident that we will start to see improvements through the year, particularly at Obuasi."
- Gold production increased by 8% to 6.052Moz, largely due to the merger with Ashanti
- Total cash costs¹ increased by 25% to $268/oz mainly due to stronger operating currencies
- Adjusted headline earnings² decreased by 7% to $263m which included the effect of the change in the estimated deferred tax rate
- Final dividend declared at R1.80 per share or 30 US cents per share, resulting in a total dividend of R3.50 or 56 Us cents per share
With respect to the hedge book restructuring, Godsell noted that this had been driven in part by a view that the gold price was likely to trade in the current range or higher and therefore there was the desire to have greater exposure to the spot price on production going forward. "We reduced the hedge by some 2.2 million ounces in the fourth quarter, while also reducing hedge levels this year to some 10% of expected 2005 production, stepping up slightly to approximately 17% in 2006, and then more evenly distributed thereafter, so as to give our investors the benefit of both continued reductions in the combined AngloGold Ashanti hedge book and greater exposure to the spot price going forward."
Turning to operating performance, he said that performance overall showed modest gains in production, combined with increased costs, which was largely the result of stronger local currencies in South Africa, Brazil, Argentina and Australia. "At our South African operations, which accounted for 45% of our production this quarter, cash costs reduced by 2% in rand terms to R59,541/kg which is a significant achievement." Elsewhere in Africa, open-pit operations experienced the impact of higher mining, oil and transport costs.
On the underperformance of the Ashanti assets, Godsell commented that Obuasi production continued to suffer from its recent heritage of capital starvation but said he was confident that the operation would show signs of recovery by the end of the year. Operating leadership had been strengthened with the appointment of two deputy chief operating officers, reporting to Chief Operating Officer Dave Hodgson.
"Neville Nicolau, who has an impressive track record in running the South Africa region, will now focus on West, East and Southern Africa, and I have no doubt that under his leadership we will start to see the improvements in production and cost management that we are looking for, particularly with regard to the Ashanti assets." Similarly, the five operations outside Africa, together with major new projects in Brazil and Australia being initiated this year, would "benefit greatly from Robert Carvalho Silva's dedicated leadership".
At its meeting in Johannesburg this week, the Board of Directors approved the $121m Cuiabá deepening project in Brazil which will increase production at AngloGold Ashanti Brazil (formerly known as Morro Velho) from 190,000oz per year to 250,000oz per year, starting in 2007.
Godsell said he was optimistic that the joint venture partners in the Boddington project in Australia would progress the feasibility study in 2005 "to the point where our respective boards can make an informed decision on this significant orebody".
¹ 2003 restated to reflect the change in accounting treatment of ore reserve development expenditure.
² Headline earnings before unrealised non-hedge derivatives and fair value gains on interest rate swaps.
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Except for historical information contained herein, there are matters discussed in this news release that are forward-looking statements. Such statements are only predictions and actual events or results may differ materially. For discussion of important factors including, but not limited to development of the Company's business the economic outlook in the gold mining industry, expectations regarding gold prices and production, and other factors, which could cause actual results to differ materially from such forward-looking statements, refer to the Company's annual report on the Form 20-F for the year ended 31 December 2003 which is filed with the Securities and Exchange Commission on 19 March 2004.