AngloGold Ashanti Reports Strong First-Half Performance, Boosts Dividend
One of the biggest gold producers in the world, AngloGold Ashanti, delivered a strong financial and operational performance in the first half of 2024 thanks to improved production, efficient cost management, and higher gold prices. The company’s turnaround efforts in Brazil and recovery from early-year challenges in Australia contributed significantly to the positive results.
The Denver-headquartered miner reported a 2% year-on-year increase in gold production to 1.25 million ounces for the first six months of 2024. This uptick, coupled with a higher average gold price received, propelled the company’s adjusted EBITDA to $1.118 billion, marking a substantial 65% increase from the same period last year.
AngloGold Ashanti’s CEO, Alberto Calderon, expressed satisfaction with the results, stating, “These results show the hard work that’s been done to improve the fundamentals of our business, to drive productivity benefits and manage costs to ensure we capture the benefit of stronger gold prices.” Calderon added, “We expect to deliver an even stronger second-half performance.”
Cost Control Amid Inflationary Pressures
In a notable achievement, AngloGold Ashanti managed to reduce its total cash costs per ounce by 1% year-on-year to $1,158, despite facing inflationary pressures. The company reported a realised inflation rate of about 6% across its portfolio during the first half of 2024. This cost reduction was primarily attributed to improved operational performance and enhanced efficiency linked to the company’s Full Asset Potential initiatives.
The all-in sustaining costs (AISC) per ounce for the group increased marginally by 2% to $1,589, mainly due to planned higher sustaining capital expenditure. However, this increase was modest compared to the inflationary environment, highlighting the company’s effective cost management strategies.
Brazilian Renaissance
A standout feature of AngloGold Ashanti’s first-half performance was the significant turnaround in its Brazilian operations. The Americas segment, which includes AngloGold Ashanti Mineração (Cuiabá), Serra Grande, and Cerro Vanguardia, saw a 10% year-on-year increase in gold production to 257,000 ounces. More impressively, total cash costs per ounce from this business unit improved by 18% year-on-year to $974.
Calderon highlighted the importance of this turnaround, saying, “We took decisive steps last year to restructure our business in Brazil after a sustained period of losses. That created the foundation for this step-change in operating performance, which we will look to improve further.”
The transformation in Brazil was particularly evident in the performance of individual mines. AngloGold Ashanti Mineração reported a 16% increase in gold production and a 19% decrease in total cash costs per ounce. Similarly, Serra Grande saw a 14% rise in gold production accompanied by a 20% reduction in total cash costs per ounce.
Quarterly Improvements and Operational Challenges
The company’s second-quarter performance bolstered its first-half results, with gold production rising 12% quarter-on-quarter to 663,000 ounces. This improvement was largely driven by the recovery of Australian assets from flooding events that occurred toward the end of the first quarter. Tropicana and Sunrise Dam, in particular, saw production increases of 38% and 14% respectively in the second quarter.
Siguiri mine in Guinea also contributed to the stronger second-quarter performance, with gold production up 67% quarter-on-quarter as metallurgical recoveries improved significantly.
However, the company faced challenges at its Obuasi mine in Ghana. While production remained steady quarter-on-quarter at 54,000 ounces in the second quarter, AngloGold Ashanti noted that flexibility challenges in the current mining Block 8 mean 2024 production at Obuasi is forecast to be around the lower end of guidance.
Financial Strength and Shareholder Returns
The improved operational performance translated into strong financial results. AngloGold Ashanti generated $206 million in free cash flow in the first six months of 2024, a significant turnaround from the $205 million outflow in the same period last year. This increase was primarily attributed to the improved performance in the Americas, higher gold prices, and loan repayments from the Kibali joint venture.
Basic earnings for the half-year stood at $311 million, or 74 US cents per share, compared to a loss of $39 million, or 9 US cents per share, in the first half of 2023. Headline earnings, a measure closely watched by investors, rose to $313 million, or 74 US cents per share, from $61 million, or 14 US cents per share, a year earlier.
The company’s balance sheet remained robust, with liquidity of approximately $2.3 billion at the end of June 2024, including cash and cash equivalents of about $983 million.
In light of the strong performance and positive outlook, AngloGold Ashanti declared an interim dividend of 22 cents per share, a substantial increase from the 4 cents paid in the first half of 2023. This 450% year-on-year increase in dividend payout underscores the company’s commitment to delivering value to shareholders.
Safety Concerns
Despite the overall positive results, the company reported a tragic fatality at its Geita mine in Tanzania. A contractor was killed in a light vehicle accident in May 2024. AngloGold Ashanti stated that an in-depth investigation into the incident has been completed, and steps have been identified to prevent similar accidents in the future.
Looking Ahead
AngloGold Ashanti reaffirmed its guidance for 2024 across all metrics, including gold production, AISC per ounce, total cash costs per ounce, and capital expenditure. This confidence in maintaining guidance despite the challenges faced in the first half suggests that the company expects continued operational improvements and cost management successes in the latter part of the year.
The company continues to focus on improving its valuation relative to North American peers by enhancing cost performance and cash conversion while increasing the life of its key mines and prioritizing the successful development of major projects.
In conclusion, AngloGold Ashanti’s first-half results for 2024 demonstrate the company’s ability to navigate challenging operational environments and capitalize on favorable market conditions. The significant improvements in Brazil, effective cost management across the portfolio, and the substantial increase in shareholder returns position the company well for the remainder of the year. However, the tragic fatality at Geita serves as a sobering reminder of the ongoing safety challenges in the mining industry, an area where AngloGold Ashanti and its peers must maintain unwavering focus and commitment.
As AngloGold Ashanti continues to work through the challenges at Obuasi and build on the successes at Iduapriem, its experiences will likely provide valuable lessons for the entire Ghanaian gold mining sector. The coming months will be crucial in determining whether the company can turn around its performance in Ghana and fully capitalize on the country’s rich gold resources.
