Bheki Mpofu
3 November 2009
Johannesburg — ANGLOGold Ashanti reported yesterday that production in the third quarter to September rose 5%, but it revised production targets for the year downwards mainly due to safety stoppages at TauTona mine near Carletonville.
This is the second time in two successive quarters that AngloGold Ashanti has had to lower its target for the full year, with production now expected to be 4,55- million to 4,6-million ounces for the full year from the original target of about 5-million ounces.
In the June quarter, the group lowered its full-year production forecast to between 4,7-million and 4,8-million ounces from an initial target of about 5-million ounces. The group produced 4,98- million ounces of gold last year.
AngloGold said yesterday it had suspended underground operations at the TauTona operation to conduct an inspection of the steelwork along the mine's shaft system, which should take about two months to complete.
The company reported four fatalities at its mines in the third quarter, which resulted in safety stoppages. The mine had been forecast to produce 295000oz of gold this year.
"TauTona could potentially be closed until the end of this year while this remedial action is completed. The effect of this interruption has resulted in a revision of our annual guidance," CEO Mark Cutifani said.
The group said third-quarter output rose to 1,187-million ounces due to continued improvements at Geita mine in Tanzania and Vaal River operations. Geita continued its recovery under a new management team, delivering a 32% rise in production to 83000oz for the quarter. Vaal River mines output rose 20%.
"We continue to make breakthroughs in effecting the turnaround at Geita," CEO Mark Cutifani said. "We've also made some strong safety gains at our Vaal River operations, an area that continues to be our top priority."
Production for the quarter fell short of AngloGold's original target of about 1,2-million ounces.
The group reported an adjusted headline loss for the quarter of 596m as it continued to reduce its hedge book. Excluding the hedge book, it posted headline earnings of 163m.
AngloGold Ashanti said it spent 797m to reduce its hedge book to 4,3-million ounces, and expected a fall of 800 000oz a year from next year to 2015, when it would be hedge free.
The hedge book, entered into many years ago to fix future gold production at what was then an attractive price, diminished its attraction for investors, who take a view on gold companies based on movements in the gold price.
Cutifani yesterday joined the growing list of mining executives warning against the negative effect on the industry of higher electricity tariffs, saying Eskom's proposed 45% increase would push up AngloGold's costs in SA from 13% to about 25%.
"Should Eskom's request be granted, pressure will be placed on AngloGold Ashanti's South African operations which currently account for 40% of annual production," he said.
The situation was worsened by stronger currencies in its key regions of operations, which continued to erode the benefits of a stronger gold price. Brazil's real strengthened 10% on average in the quarter, while the rand and the Australian dollar gained 9%.
Cutifani said the group would "accelerate" restructuring in SA to stay profitable.
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