AngloGold Ashanti year earnings drop 39 per cent

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This came as the precious metal’s spot price posted its biggest drop in three decades.

The company on Wednesday said full-year adjusted headline earnings were $599 million, or 153 U.S. cents per share, compared with $988 million or 255 U.S. cents per share in 2012.

“Despite a 16 per cent decline in the gold price received for the year, the company recorded solid performance for the full year 2013 reflecting a 4 per cent increase in production to 4.105Moz and all–in sustaining costs, despite inflation, decreasing by roughly 6 per cent compared with 2012,” AngloGold said in a statement.

The year–on–year improvement in production marks the first increase in annual production for AngloGold Ashanti in nine years.

This reflected a recovery from strike activity in South Africa in 2012, substantial improvements in both direct operating and overhead costs, and the introduction of commercial production from two new, world–class, low–cost mines in the fourth quarter.

“Last year (2013) marked the best year of safety performance in AngloGold Ashanti history, providing an anchor for solid production and cost results amidst a challenging gold price environment, wage negotiations in South Africa, and a significant restructuring of corporate and operating cost,” AngloGold said.

Net loss attributable to equity shareholders for the full year was $2.23bn, compared to a profit of $897m in 2012, primarily due to a post–tax impairment of assets and investments and inventory write–downs of $2.5bn and the write–offs of deferred tax assets at Ghana and CC&V of $330m.

Net debt increased to $3.11bn at the end of 2013, from $3.01bn at the end of the third quarter of 2013, primarily as a result of project capital expenditures required to fund the final development phases of the Tropicana project in Australia and ongoing investment in the Kibali project in the DRC, both of which commenced commercial production during the fourth quarter of the year.

Free cash outflow during the fourth quarter was $82m. Improved cash flow from operating activities meant all interest, tax, stay–in–business capex and the majority of $224m project capex was funded.

Given an improvement in 12–month rolling EBITDA amounting to $1.67bn, Net Debt to EBITDA declined to a ratio of 1.86 times, from 2.02 times at the end of the third quarter.

Production in 2013 was 4.105Moz at a total cash cost of $830/oz, compared to 3.944Moz at a total cash cost of $829/oz the previous year. Group production beat guidance for the year of 4.0Mozs – 4.1Mozs at total cash costs of between $815–845/oz. All–in sustaining costs for the group in 2013 was $1,174/oz, down from $1,251 in 2012.

As a result of declines and volatility in the gold price during 2013, reserves and resources are calculated at $1,100/oz and $1,600/oz, respectively, compared to 2012 reserves and resources calculated at $1,300/oz and $2,000/oz.

“Having achieved our best year on safety, we’ve returned to production growth for the first time in almost a decade, thanks to new lower cost ounces from Tropicana and Kibali,” Chief Executive Officer Srinivasan Venkatakrishnan said.

“The new production in the portfolio gives us the flexibility to rationalise marginal production while we continue to focus closely on overhead and operating costs.”

Given a volatile gold price, the company announced that it will not pay a final dividend and elected to prioritise its cash flow at this stage for debt repayment and for the completion of existing capital growth projects, namely the Kibali underground mine and sulphide circuit in the DRC, the expansion of the Cripple Creek & Victor mine in the US, and the life extension project at its Mponeng mine in South Africa.

AngloGold Ashanti will review this position again at the half year in light of the prevailing gold price, debt levels and progress on its projects.