$141m impairments slashes AngloGold Ashanti’s basic earnings to $40m at end-Q2 2023
AngloGold Ashanti Limited reaffirmed annual guidance as it reported an improved second quarter performance compared to the first three months of the year, underpinned by a 12% increase in production.
Gold production rose to 652,000oz in the second quarter of 2023, versus 584,000oz in the previous three-month period. The stronger second quarter was supported by production and cost improvements across most assets primarily driven by both higher tonnes processed and recovered grades. Total cash costs improved 2% quarter-on-quarter and all-in sustaining costs (“AISC”) improved 4% quarter-on-quarter.
AngloGold Ashanti is taking steps to narrow a value gap with international peers by improving relative costs and the life of its key mines, all while enhancing safety, cash conversion and the delivery of projects. In the past year, the Company added an additional 5Moz of Mineral Resource in Nevada, proposed a joint venture with Gold Fields in Ghana to create Africa’s largest gold mine, and proposed a change in the primary listing for its shares to the New York Stock Exchange (NYSE), the largest global market for investment in gold equities.
“We’re seeing momentum continue to build at our key assets after a steady start to the year and a much improved second quarter,” Chief Executive Officer Alberto Calderon said. “We’re expecting strong operating improvements in the second half.”
First Half Capped by Improved Second Quarter
Following a challenging first quarter of 2023, second-quarter production increased versus the first quarter at Kibali (38%), Geita (21%), AGA Mineração (63%), Serra Grande (47%), Sunrise Dam (8%) and Tropicana (16%). Second quarter production would have been higher were it not for the carbon-in-leach (“CIL”) tank failure at Siguiri, which has since been repaired. Second quarter total cash costs per ounce were 2% lower than in the first quarter of 2023.
Second-quarter total cash costs per ounce rose 8% year-on-year compared with the 16% year-on-year increase in first-quarter total cash costs per ounce.
Obuasi Continues First-Half Ramp-Up
First half production was marginally higher versus the first half of 2022, with a strong production gain from Obuasi supported by steady contributions from Sunrise Dam Geita, Iduapriem and Tropicana. Recovered grades continued their upward trend, increasing 4% year-on-year mainly due to ongoing reinvestment in the portfolio.
The Obuasi gold mine in Ghana continued its ramp-up with a 29% jump in production year-on-year alongside a drop in unit costs as grades and tonnages improved. Obuasi is expected to deliver a stronger second half performance as more material is moved to surface following successful de-bottlenecking of existing infrastructure.
In Brazil, the Cuiabá mine continued to produce gold from its gravity circuit and gold concentrate in line with its plan. Despite second-quarter improvements in production versus the first quarter of 2023, the Brazil portfolio continued to make losses.
Continued Inflationary Impact
Total cash costs per ounce increased 11% from $1,068/oz in the first half of 2022 to $1,189/oz in the first half of 2023, mainly due to costs related to Brazil of $20/oz and the Siguiri CIL tank failure of $22/oz, higher operating costs as a result of sustained inflationary pressures, higher waste stripping costs at Tropicana in line with expectations, lower by-product revenue and volumes in Brazil and Argentina, and higher royalties paid due to higher revenues. The increase was partially offset by weaker foreign exchange rates against the US Dollar and favourable inventory movements. AISC were 12% higher at $1,587/oz in the first half of 2023 compared to $1,418/oz in the first half of 2022, mainly due to higher total cash costs and a planned increase in sustaining capital expenditure.
Basic earnings were $40m, or 10 US cents per share, in the first half of 2023, compared to basic earnings of $298m, or 71 US cents per share, in the same period a year earlier. Basic earnings in the first half of this year were impacted by losses of $141m mainly related to impairments and derecognitions in the Brazil portfolio. Headline earnings of $140m, or 33 US cents per share, in the first half of 2023, compared to $300m, or 71 US cents per share, in the same period a year earlier.
AngloGold Ashanti’s Full Asset Potential review programme, to optimise assets and counter inflation, is making good progress, with highlights including increased underground tonnes mined at Sunrise Dam and Geita, with the former also achieving much improved recoveries.
At Tropicana progress has been made with our decarbonisation strategy. Pacific Energy will build and operate a 62MW wind and solar facility at the site, supplementing the existing natural-gas plant. The project is expected to halve natural gas consumption at the site.
Key Operational and Financial features
- Solid contributions from Obuasi, Sunrise Dam, Geita, Iduapriem and Tropicana drive production of 1.236Moz in H1 2023 vs 1.233Moz in H1 2022
- Total cash costs per ounce of $1,189/oz in H1 2023 vs $1,068/oz in H1 2022, mainly driven by anticipated cost increases as a result of inflationary pressures, higher waste stripping costs at Tropicana, costs related to Brazil and the Siguiri CIL tank failure, partly offset by weaker foreign exchange rates against the US Dollar
- AISC of $1,587/oz in H1 2023 vs $1,418/oz in H1 2022, mainly on increased total cash costs and planned higher sustaining capital expenditure • Adjusted EBITDA decreased year-on-year from $864m in H1 2022 to $678m in H1 2023; Adjusted EBITDA margin of 32%
- Basic earnings of $40m in H1 2023 from basic earnings of $298m in H1 2022; Headline earnings of $140m in H1 2023 from $300m in H1 2022 • Adjusted net debt of $1,194m at 30 June 2023 vs $878m at 31 December 2022; Adjusted net debt to Adjusted EBITDA ratio of 0.74 times • Free cash outflow of $205m in H1 2023 compared to an inflow of $471m in H1 2022, which was boosted by legacy payments of $460m from Kibali during H1 2022 • Interim dividend of ZAR 70 cents per share (equivalent 4 US cents per share) declared
