Of AngloGold’s 19 mines in nine countries, the South African operations have been the slowest in showing cost improvement.
While South Africa’s all-in sustaining costs (AISC) average $1 088/oz, the Americas are putting gold out at $792/oz, continental Africa at $815/oz and Australia at $875/oz.
South Africa is also no longer the volume leader. Of the 3.95-million ounces produced by AngloGold Ashanti in 2015, continental Africa produced the most at 37%, with South Africa coming in with 26%, the Americas with 22% and Australia with 15%.
Now a 10% production improvement is being demanded of the South African operations, which, if attained, will translate into a 10% cost improvement.
Contributing to expectation of better South African performance is the high rand gold price. AngloGold CEO Srinivasan Venkatakrishnan told Creamer Media’s Mining Weekly Online during this week’s media roundtable that the South African operations begin to take on a “very competitive” profile when exchange rate weakening is added to a 10% improvement.
The current focus is on getting the South African safety performance to improve, to which production and cost performance are linked.
Given the company’s overall success in lowering costs and boosting its balance sheet, it is seen as well positioned to take advantage of improved conditions on all fronts. “We’re in a sweet spot,” Venkat said, against the background of the company offering good leverage to production improvement.
Reduced costs and widened margins were providing a kicker as are currency advantages in non-dollarised countries. Against that background, AngloGold remains intent on continuing to reduce debt and generate more free cash flow as a way of strengthening its investment case.
“What we want to do now is to be opportunistic and to use that free cash flow to chip at the debt and thereby reduce the interest burden, which, in turn, generates free cash flow into perpetuity,” Venkat commented to journalists. The company has delivered on a range of self-help measures to internally generate funds and avoid going to the market to raise new equity capital.