AGC Will Survive Market Crash - Report

Accra, (Greater Accra) 30 Oct., The Ashanti Goldfields Company (AGC) said today it is well protected against the current low gold price. AGC says it could plan and execute its investment and exploration programmes with the same confidence and drive as before, the company's third 1997 quarterly report released at a briefing with journalists and securities houses in Accra today, said. ''Ashanti is well placed to meet the 1997 objective to produce 1.1 million attributable ounces at or below 265 dollars an ounce''. The report cited the Obuasi mine as having produced over 215,000 ounces in the quarter which ended on September 30, this year. All operations of AGC met their production targets except Iduapriem, near Tarkwa in the Western Region. Mr.. James Kwamena Anaman, Corporate Affairs Manager, Mr. Trevor Schultz and Mr. Mark B. Keatley, Chief Operating and Chief Financial Officers, briefed the journalists on the company's operations. Mr. Keatley said the total third quarter group production of 290,059 ounces valued at 257 dollars an ounce brings the year's production total to 861,854 ounces at a cash cost of 263 dollars an ounce. He said excellent results were obtained in underground and surface mining operations, adding that ''three drill holes have produced encouraging intersections. Ashanti is currently operating in 14 countries with 35 active exploration sites. Most of these are located in the West African Sub-Region. Mr. Schultz said at the end of the first nine months, Ashanti remains on track to meet all its stated objectives for this year, emphasizing Mr. Anaman's view that the company is definitely in good stead. He noted that the company's budget on the development projects at Bibiani and Siguiri in Guinea are making "excellent progress" and are expected to be in production by September next year. On the Geita mine in Tanzania, the Chief Operations Officer said it has advanced from exploration status to project status with resources of three million ounces, adding that feasibility studies are continuing. He said the third quarter earnings of 15 million dollars reflects the improving production cost performance, as well as the contribution of the group's hedging programme which realized an average gold selling price of 450 dollars an ounce. Ashanti, listed on the Ghana Stock Exchange in 1994 and is the highest capitalised equity, has approximately 5.8 million ounces hedged at a gold price of over 420 dollars an ounce. As to if Ashanti might diversify its operations to make for some of its losses, Mr. Schultz said : ''we are basically a gold mining concern. We have not at any time considered the idea yet. We, however, constantly review our operations to face up to the realities of the times''. According to Mr. Keatley, earnings for the quarter ended September 30, 1997 were 16 million dollars with exceptional redundancy costs of one million dollars. The redundancy was at the Obuasi mine where 800 people went on voluntary retirement over the period. He said Ashanti has sought to look ahead and protect itself from the volatility of the gold market and the costs of expansion and running new mines. This it has done through the hedging system, a procedure where the commodity is protected against possible future losses. Mr. Keatley said gold revenue for the third quarter, excluding hedging income, totalled 94.2 million dollars. This is equivalent to 325 dollars an ounce. Hedging income earned the company 36.4 million dollars, resulting in a realized gold price of 450 dollars an ounce, Mr. Keatley said the 1998 production forecast of 1.35 million ounces is almost covered by one million ounces of hedge contracts at an average price of 418 dollars per ounce. Ashanti has accumulated hedging income at 56 million dollars for delivery in the fourth quarter of 1997 and 1998, which will be credited to revenue for the originally designated delivery periods. Mr. Keatley said with contracts and accrued income in place, Ashanti expects to realize a price of about 400 dollars an ounce for 1998. He said operating profits for the year to date dropped slightly to 60.1 million dollars, compared to the 62.3 million dollars for 1996.