AngloGold on track to meet full-year guidance following solid first quarter

JSE- and NYSE-listed AngloGold Ashanti reported a solid performance for the first quarter of the year, with production steady year-on-year, an increase in total cash costs limited to 4% and a strong improvement in cash flow.

The company remains on track to achieve its full-year guidance.

Production for the first quarter was 588 000 oz, unchanged from that produced in the first quarter of 2021, with strong improvements from the Australian operations having offset lower production from Kibali, in the Democratic Republic of Congo; Geita, in Tanzania; and Obuasi, in Ghana, which resumed its underground production ramp-up in January, as planned.

Output from the Americas region was flat.

Total cash costs for the three months were $1 041/oz, up 4% year-on-year, driven largely by what the company notes were uncontrollable factors, including rising inflation across several categories of input costs and higher royalties – owing to the higher gold price received.

Inflationary pressure was partly offset by operating improvements and an 8% increase in underground grades.

Free cash flow increased to $268-million from an outflow of $92-million in the first quarter of 2021, ensuring the balance sheet remains flexible during an ongoing period of reinvestment in improving its portfolio, the company highlights.

The increase in free cash flow was aided by $326-million received from Kibali.

“We’re starting to achieve our main catalysts. There’s still a long way to go, but we’re starting to see an improving operational performance across the portfolio, underpinned by a more focused operating culture and a better grade profile,” says CEO Alberto Calderon.

He highlights that the average grade during the period was similar to that of the first quarter of 2021, with this not being seen in several years, as the grade had been deteriorating previously. He indicated that this is the result of additional investments, and the company now seeing the results of more predictable operations at mines.

AngloGold is embedding a new operating model after completing the implementation of an organisation-wide restructuring. The company has introduced new leadership and removed duplicate roles and unnecessary expenditure to reduce costs and improve operating results.

A programme of increased investment is under way to improve mining flexibility and extend the lives of its key assets.

The company started its full asset potential review process at the Sunrise Dam mine, in Australia, and the Siguiri mine, in Guinea – the first step in achieving a step-change improvement in operating performance and competitiveness, with an additional four sites to undergo the process over the remainder of the year.

The $365-million cash acquisition of Corvus Gold was completed in January, which AngloGold says creates a strong foothold in the prospective Beatty district in southern Nevada, which it plans to bring into production in about three years.

It notes that the balance sheet remained in a solid position after funding the Corvus acquisition and paying the 2021 year-end dividend, with about $2.5-billion in liquidity, including cash of $1-billion at the end of March.

The company highlighted a strong safety performance for the quarter, with the total recordable injury rate having improved by 55% year-on-year to 1.19 injuries per million hours worked. It also recorded a fatality-free quarter.

Cash distribution of $326-million was received from Kibali and an additional $210-million was received after the quarter’s end.

The company expects sequential quarterly improvements in production for the remainder of the year.

Obuasi is on track to achieve a full mining rate of 4 000 t/d by the end of June.

A reinvestment programme is on track to grow ore reserve and production, at lower costs, over the medium to long term.

All-in sustaining costs (AISC) increased 9% year-on-year to $1 405/oz the period, mainly as a result of planned higher sustaining capital expenditure (capex) and increased total cash costs.

Adjusted earnings before interest, taxes, depreciation and amortisation decreased 2% year-on-year to $438-million in the quarter.

Group guidance for production remains unchanged at 2.55-million to 2.80-million ounces, with the majority of the production growth expected to come from Obuasi.

Across the rest of the portfolio, AngloGold anticipates some marginal improvements in production at Iduapriem, Siguiri and Geita, and consistent performances at its other assets.

Group guidance for total cash costs remains unchanged at $925/oz to $1 015/oz and for AISC at between $1 295/oz and $1 425/oz.

The total cash cost forecasts for the year are driven by increases in the prices of oil, consumables and logistics, with AISC further impacted by elevated levels of sustaining capital expenditure in line with the prior year.

Management anticipates that most of these inflationary pressures are catered for in the current guidance range.

Total capex guidance remains unchanged at between $1.05-billion and $1.15-billion, with sustaining capex at between $770-million and $840-million and non-sustaining capex at between $280-million and $310-million.