AngloGold Ashanti fails to shine

World number two gold miner AngloGold Ashanti on Friday reported a 63 percent decline in headline earnings per share for its March 2005 quarter to 39 cents from 104 cents in the December 2004 quarter.

Analysts had expected a marginal increase in headline earnings per share to 68 cents, with forecasts ranging from 55 cents to 78 cents.

The group reported basic earnings per share of 19 cents for the March quarter down 78 percent from the previous quarter, while headline earnings adjusted for the effect of unrealised non-hedge derivatives fell 41 percent to 175 cents from 296 cents.

Output falls five percent

AngloGold Ashanti gold output fell five percent to 1.569 million troy ounces in the March quarter from 1.651 million oz in the previous quarter.

Following its long planned closure, the group's Ergo mine in South Africa was being treated as a discontinued operation and the December 2004 quarter's numbers had been restated to exclude Ergo.

The group also attributed the decline in production to lower South African production and usually strong performances during the December 2004 quarter at its 40 percent held Morila mine in Mali and Cerro Vanguardia in Argentina, in which AngloGold Ashanti has a 92.5 percent stake.

Gold price received rose seven percent

The group's gold price received rose seven percent to R82 152/kg from R76 691/kg or $424/oz from $395/oz.

The increase in the price was attributed to the restructure of the group'' hedge announced in January 2005.

The restructuring of the hedge announced in January had "delivered the intended positive impact on our received price more closely matching the average spot price for the quarter", AngloGold Ashanti Chief Executive Officer Bobby Godsell said.

AngloGold Ashanti's total cash costs rose 2.8 percent to R54 778/kg from R53 299/kg or $284/oz from $274/oz.

Five quarters of decline

After five quarters of decline, gold production at the Obuasi mine increased by two percent to 92 000 oz, with tonnage treated up ten percent on the previous quarter.

"I'm pleased to say that during April, underground grades at Obuasi have improved by one gram per ton and management expects production to show progressive increases in each of this year''s remaining quarters," Godsell said.

While production at Siguiri in Guinea, 85 percent held by AngloGold Ashanti, was constant quarter-on-quarter, total cash costs improved nine percent.

At Iduapriem in Ghana, in which the group has an 85 percent stake, production improved ten percent with cash costs down 19 percent.

Similarly, Geita in Tanzania, wholly owned by the group, saw production up slightly with total cash costs down 19 percent.

Improvements across Ashanti

"These improving trends across the Ashanti assets are important and give me much encouragement about what these assets can contribute to this company as the year progresses," Godsell said.

Referring to margins, he observed that it was undoubtedly a great frustration for investors that as the gold price had risen over the past year, margins in gold companies had shrunk.

One of the drivers of the higher gold price was the weaker dollar, which in turn meant stronger operating currencies in almost all of AngloGold Ashanti's producing regions including Australia, Argentina, Brazil, Namibia and South Africa.

Added to this, significantly higher oil prices and the growth demands of China had translated into price inflation in many of the company's consumables such as cement, tyres and steel.