AngloGold resumes dividends on free cash flow jump

24Feb 2017
Prosper Makene
The Guardian
AngloGold resumes dividends on free cash flow jump

THE AngloGold Ashanti has said that would resume dividend payments following a hiatus of more than three years, after lower operating and interest costs helped it nearly double free cash flow to $278m.

A photograph shows AngloGold Ashanti plant and open pit at Geita, one of the company's top performing mines.

The company declared a dividend of approximately 10 US cents a share for 2016. Adjusted Headline Earnings (AHE) was $143m, or 35 US cents per share, compared with $49m, or 12 US cents per share in 2015.

AngloGold Ashanti Chief Executive Officer Srinivasan Venkatakrishnan said: “Production from our operations delivered a strong turn around in the second half of the year. We have again generated strong cash flows despite a volatile gold price, which has further strengthened our balance sheet and improved flexibility,”

Venkatakrishnan added: “We will continue to deliver on our strategy through the development of high-return, Brownfield projects in order to continue to improve the underlying quality of our portfolio.”

All in Sustaining Costs (AISC) came in within revised guidance range at $986/oz, up from $910/oz in 2015. The AISC reflects continued cost discipline and weaker local currencies in some jurisdictions, offset by an increase in sustaining capital expenditure and inflation, he observed.

The miner said production of 3.6Moz was within the original guidance for the year ended 31 December 2016 at a total cash cost of $744/oz, compared to 3.8Moz (excluding discontinued operations) at $712/oz in the prior year.

Production was negatively impacted by weaker output from the South Africa mines due mainly to safety-related stoppages, lower grades from Kibali, a planned decrease in head grades at Tropicana and Geita, and no production contribution from Obuasi.

However, the AngloGold Ashanti Boss said that the sharp improvements in free cash flow and earnings were achieved through strong ongoing focus on cost and capital discipline, as well a higher gold price.

“AngloGold Ashanti has since 2013 used ‘self-help’ measures including asset sales and efficiency improvements to reduce debt and improve balance sheet flexibility without diluting shareholders,” he said.

“… at the same time, improved safety and cash-flow margins across its 17-mine portfolio. The company has prioritised inward investment in high-return brownfield projects over acquisitions, as it seeks to improve the quality of its production base and extend mine lives,” noted

AngloGold Ashanti delivered a steady operating and financial performance in the second half of 2016, with production coming in at 1.9Moz compared to 2.0Moz in 2015.

This operating result was achieved despite safety-related stoppages that impacted output by roughly 60,000oz in SA, planned lower grades at Geita and Tropicana, and the Obuasi mine having been on care and maintenance for last year.

SAFETY
The number of fatal accidents across the Group’s operations reduced by more than a third compared with 2015. Regrettably, however, six operating fatalities were recorded in South Africa during 2016 and another in Brazil. Despite these setbacks, significant safety milestones were achieved last year including a fatality free fourth quarter across all business units.
Outlook

Production guidance for 2017 year is estimated to be between 3.6Moz and 3.755Moz. Total cash costs are estimated to be between $750/oz and $800/oz and AISC between $1,050/oz and $1,100/oz at average exchange rates against the US dollar of 14.25 (Rand), 3.40 (Brazil Real), 0.75 (Aus$) and 16.50 (Argentina Peso), with oil at $58/bl average for the year, based on market expectations.

Capital expenditure is anticipated to be between $950m and $1,050m, with reinvestment at Cuiaba, in Brazil, where a greater rate of ore reserve development is expected to improve mining flexibility hampered by geotechnical challenges in recent years; Iduapriem in Ghana, to strip waste rock from the Teberebie ore body to extend mine life, and lower cash costs; Geita, in Tanzania, to replace the mine’s original 20-year old power plant to ensure reliable electricity supply.

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