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Africa’s third largest bullion producer AngloGold Ashanti has posted a six-fold improvement in adjusted headline earnings from the previous quarter to US$113 million, attributing the improvement to costs being better than guidance and the company making steady progress recovering from the strike action in South Africa in the last quarter of 2012.

The company noted that a continued emphasis on cost optimisation saw total cash costs beat guidance at US$84/oz, with further improvements during the year as focus was sharpened on generating sustainable free cash flow from an improving portfolio. .

Further, AngloGold Ashanti said its two key new projects – Tropicana in Australia and Kibali in the DRC – are on schedule to pour their first gold by the end of the year adding half-a-million ounces of new production.

“Our major projects remain on budget and on schedule to pour gold by year-end, improving the quality of the portfolio. Prudent capital allocation will drive our strategy to deliver profitable ounces and sustainable free cash flow, whilst maintaining a strong balance sheet,” said newly appointed AngloGold Ashanti CEO Srinivasan Venkatakrishnan.

Production was 899 000 oz at a total cash cost of $894/oz, compared to 859 000 oz at $967/oz the previous quarter, while about 20 000 oz was lost to a lightning strike which interrupted power to the West Wits operations, and a delay in commissioning of a new mill at Geita also cost some production.

AngloGold Ashanti said continued focus on ensuring sustainable free cash flows would see the company target further operating-cost reductions through corporate restructuring; direct operating cost savings of $100/oz; and the development of higher quality near-term ounces.

The company added that further capital expenditure reductions would be explored and work is underway to rationalise exploration costs and pursue asset sales to improve the quality of the portfolio.

AngloGold Ashanti highlighted that the focus on productivity and cost is especially crucial now, given the recent weakness in the gold price, adding that Venkatakrishnan will work with his executive team in the coming months to define the company’s approach to realising value for shareholders.

Production in the second quarter is forecast at between 900 000 oz to 950 000 oz at total cash cost of $900/oz to $950/oz. This takes into account the number of public holidays in South Africa as well as annual power tariff increases and the winter power tariffs charged.

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