World number three gold miner AngloGold Ashanti warned on Tuesday that it would post a loss for the interim period due to substantial impairments and a provision for silicosis payments.
AngloGold said its headline loss for the six months to June could be as high as $98m compared to headline earnings of $93m in the same period a year earlier.
The basic loss for the period could be $167m-$185m, compared with basic earnings of $52m a year earlier.
JP Morgan Cazenove said it expected AngloGold’s results to be in line with its profit forecast of $46m. Excluding the exceptional items, the AngloGold numbers showed profit of $44m, it said. AngloGold would record an $86m after-tax impairment against some of its South African mines.
AngloGold CEO Srinivasan Venkatakrishnan said in June the company was closing its Kopanang and Savuka mines, which were unprofitable and near the end of their lives.
The company could dismiss up to 8,500 employees, a third of its local workforce, adding to the 70,000 mining jobs cut in the industry in the past five years. The one-off retrenchment cost of $47m had been provided for and would be reflected in the interim results.
AngloGold was setting aside $46m after-tax towards the settlement of a silicosis class action claim. The company and its peers were in talks to settle the matter out of court.
“The ultimate outcome of these negotiations and the court sanction of the agreement remains uncertain and accordingly the provision is subject to adjustment in the future,” the company warned.
JP Morgan said: “In our view $46m is a materially lower potential liability than many market observers had feared.
“This compares to Gold Fields’ predisclosed provision of $30m,” it said. Anglo American had set aside $101m. AngloGold and five other mining companies had formed a working group to seek an alternative to the class action.
“The working group remains of the view that achieving a comprehensive solution — which is both fair to past, present and future employees, and sustainable for the sector — is preferable to protracted litigation,” AngloGold said.
The work had been under way for two years.
An appeal against a ruling that went against the companies would be heard in March 2018.
The class action was brought against gold mining groups in 2013 by people who contracted lung illnesses while working underground by breathing silica dust released during blasting and handling of ore.
On top of these impairments and provisions, AngloGold said it had experienced higher operating costs in SA and Brazil due to firmer currencies against the dollar in both jurisdictions.