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AngloGold's output forecasts are considerably reduced by the current power crisis
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February 07, 2008, 14:00
Due to the country's power supply crisis, AngloGold Ashanti expected a reduction of approximately 400 000oz of gold in 2008, it announced in its fourth quarter and 2007 year end earnings results today.
"This outlook statement is made in the context of the power shortage currently facing AngloGold Ashanti in South Africa, which will account for an estimated reduction of approximately 400 000oz of gold in 2008, and assumes that a sustainable 90% power supply is achieved for the remainder of the year," the company said.
The SA gold miner was expecting to produce between 4.8 million ounces (Moz) and 5.0Moz of gold at cash costs ranging from US 425/oz to US 435/oz. Diamond, gold and platinum mines in South Africa shut down production for just under a week in late January because of safety considerations owing to a warning from Eskom about unstable power supply.
Production resumed after Eskom increased the power supply from 80% to 90%. AngloGold Ashanti chief executive Mark Cutifani said: "The uncertainty around Eskom power supply is having a significant impact on our operations in South Africa.
"This uncertainty means that our South African business faces very particular challenges right now and we're working constructively with organised labour, Eskom and the government to ensure that we find sustainable solutions that protect the reserve integrity and potential of these operations."
He said the company still had a "great deal" of work to do on operational and cost performance." However, Cutifani said he was pleased with the reserve and resource generation which was noted across the business and underlined the potential across the company's global portfolio.
"I am also pleased with the improving record in safety performance that we have started to see following the launch of our Safety is our First Value campaign in November last year. We have redefined our approach to safety and will continue to evaluate all operational initiatives through the lens of safety," said Cutifani.
In October 2007 President Thabo Mbeki ordered an audit to look into safety at mines nationwide, after 3 200 miners were trapped underground. In November the National Union of Mineworkers (Num) said more than 180 miners had died in SA mines since the start of 2007.
Operational difficulties
AngloGold Ashanti reported today that fourth quarter production was 5% lower at 1 37Moz, compared with the previous quarter. This was due to what it called "safety interventions" in SA and operational difficulties at its mine in Tanzania. For the full year, output sank by 3 % to 5.48Moz, the company said.
Total cash costs for the quarter amounted to US404/oz, "primarily as a result of lower production, local currency appreciation, and the purchase of uranium to meet contractual obligations."
Total cash costs for the year increased by 16% to US 357/oz, "due to lower production, stronger local currencies and inflationary pressure." Adjusted headline earnings for the quarter were "similar to the previous quarter at $82 million", before year-end adjustments amounting to $64 million.
Including year-end accounting adjustments, adjusted headline earnings were at US 18 million. For the full year, adjusted headline earnings were US 278 million -- this is in comparison with $411 million at the end of the previous year.
A dividend of 53 South African cents per share (or 7 US cents per share) was declared for the six months ending December 31 2007. This resulted in a total dividend of 143 cents per share (or 20 US cents per share) for the year. - Sapa
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