Illustration: KAREN MOOLMAN
Illustration: KAREN MOOLMAN

AngloGold Ashanti opted to keep its Argentina mines instead of selling  them as the Covid-19 global pandemic cut production from the group’s first quarter.

AngloGold, one of the world’s largest gold miners with 14 mines in nine countries, cited this diversity as the reason for the small loss of production in the first quarter to the pandemic.

The group lost 11,000oz, or 1.5% of its gold output for the March quarter, which was 716,000oz against 752,000oz for the same quarter a year earlier.

Its Serra Grande mine in Brazil, Cerro Vanguardia in Argentina and its SA mines were interrupted during the quarter as governments in those countries took measures to slow the spread of the coronavirus.

The losses of gold were 6,000oz in Argentina, 4,000oz in SA and 1,000oz in Brazil. Much of this gold will be recovered during the course of the year.

SA lost about a week of production in the March quarter and its large Mponeng mine in SA was closed up to April 18 when the government permitted a ramp-up to 50% of capacity. There was also a small disruption to its surface dump retreatment operations.

AngloGold, under the leadership of Kelvin Dushnisky, has opted to retain the Cerro Vanguardia mines, one of three big asset sales that marked the start of his tenure in September 2018.

“After an extensive sale process and thorough review of the offers received, it has been concluded that the maximum potential value from the remaining resource endowment of the operation will be better realised inside AngloGold Ashanti,” the company said.

Cerro Vanguardia’s output fell by 13% to 45,000oz during the quarter because of disruptions from the pandemic and lower grades.

The $300m sale of the SA assets to Harmony Gold is nearing its completion date at the end of June, and the sale of the Sadiola joint venture operation in Mali is under way.

At Mponeng, AngloGold is focusing its mining on the deeper, higher-grade areas, much as Harmony is doing at its mines.

The thinking is that with fixed costs making up 70% of costs and mining with half the normal workforce, the best way to offset this imbalance is to tackle the areas that would deliver the most gold to take advantage of a record high gold price of more than R1m/kg.

The disruptions from the pandemic were offset by strong performances in the quarter from three mines in Africa: Kibali, Geita and Iduapriem in the Democratic Republic of the Congo, Tanzania and Ghana, respectively.

AngloGold has planned for minimal disruptions to its operations by building up four months’ worth of inventories of critical spares and supplies at all its mines, while ensuring there were ore stockpiles to continue feeding processing plants.

AngloGold used private aircraft to fly gold from African operations to Rand Refinery in SA for processing and then overseas to clients, ensuring a “seamless” flow of gold, it said.

Adjusted earnings before interest, tax, depreciation and amortisation (ebitda) increased by 54% to $473m in the first quarter of 2020, from $307m in the first quarter of 2019.

Operating cash flows more than tripled to $219m. Free cash flow was $4m compared with $109m outflow in the same period a year earlier.

AngloGold has $2.3bn in liquidity.

Capital expenditure came in at $90m, with $53m of that going to Obuasi, the replanned and redeveloped underground gold mine in Ghana.

seccombea@businesslive.co.za

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