AngloGold Ashanti attributes lower earnings to fall in production

LOWER sales volumes of gold bullion owing to the disposal of its South African operation, higher operating costs and unfavourable exchange rate movements muzzled full-year headline earnings per share for AngloGold Ashanti by 42 percent.

The world’s number three gold producer has completed the disposal of its high-cost South Africa operation, while earlier it disposed of its project in Mali.

Headline earnings per share in AngloGold Ashanti for the full year to the end December are expected to be 42percent lower at between $1.37 (R21.22) and $1.53, the company said yesterday. Headline earnings are expected to be lower by 36 percent at between $572 million and $642m.

The company’s lower earnings performance has been attributed to a fall in production owing to the sale of the South African operations.

The local operation accounted for 241 000 ounces of gold for 2020 when AngloGold Ashanti produced a total of 3 million ounces.

Total production for 2021 is expected to be much lower at 2.4 million gold ounces.

The voluntary temporary suspension of underground mining at the Ghanaian Obuasi mine following a sill pillar incident last year prompted the company to suffer care and maintenance costs amounting to $45m or US11 cents per share.

Other retrenchment costs incurred for the period amounted to $18m, or US4c per share, as AngloGold Ashanti shifted to a new operating model that streamlined the company’s structure.

Furthermore, the company undertook “significant reinvestments across key assets” and this affected earnings for the period.

Other impacts on the gold miner’s earnings derived from “higher operating costs resulting in an increase in the cost of sales mainly due to lower grades achieved and higher level of stockpile drawdowns”, it said.

This was worsened by “inflationary pressures and the continued impact of the Covid-19 pandemic” on costs.

Unfavourable foreign exchange movements of about $43m, or US10c per share, and increased exploration and evaluation costs of $40m, or US10c per share, also weighed down the company.

There was a slight respite for the company, though, with lower amortisation costs due to the lower production volumes and a decrease in net finance costs also providing some cover.

The fall in production also resulted in “lower taxes in most jurisdictions”.