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AngloGold reports 335 U.S. cents loss per share in Q2

AngloGold Ashanti has posted a loss of 335 U.S. cents per share for the second quarter, a significant change from adjusted earnings per share of 37 cents in the first quarter.

Author: James Macharia
Posted: Thursday , 31 Jul 2008

JOHANNESBURG (Reuters) - 

AngloGold Ashanti, the world's number three gold producer, posted a worse-than-expected loss per share for the second quarter after trimming its forward sales, but output rose despite power woes.

South Africa's AngloGold said on Thursday it sees lower gold production this year due to a power crunch in South Africa, and forecast higher total costs for the year.

The group also said it had made an acquisition in Brazil that would improve its future output.

As a result of selling its gold and uranium hedgebook early, AngloGold reported an adjusted loss per share of 335 U.S. cents for the second quarter versus adjusted earnings per share of 37 cents in the first quarter.

Six analysts surveyed by Reuters had forecast an average 206 U.S. cents in adjusted headline loss per share.

The group's adjusted headline loss was $946 million after trimming its forward sale contracts three months early, slashing one of the biggest hedgebook among its peers globally, and the biggest of any South African gold producer.

Forward sales have been used routinely by mining companies to fix selling prices for nuggets not yet mined to protect profits, but its hedge book has been clouding AngloGold's performance, analysts have said.

A surge in bullion since 2000 has turned the sector away from hedging in favour of direct exposure to gold's spot prices.

AngloGold surprised the market with an interim dividend of 50 South African cents and 6.7 U.S. cents per share, and its shares rose 3.83 percent to 247.11 rand.

JP Morgan had said it expected only rival Gold Fields to pay a dividend among gold miners this quarter.

"The company had already guided about the loss from cutting the hedgebook, so we knew of that and the market can't really be disappointed, but the dividend was a surprise," said Stephen Roelofse, a fund manager at Metropolitan Asset Management.

"I noticed their body language during their results presentation was very positive. They have done some acquisition in Brazil and seem to have a clear plan on how to grow output."

AngloGold's hedgebook stands at 6.5 million ounces, from 10.03 million ounces in the first quarter, and it plans to trim a further 0.8 million ounces to 6.1 million ounces by December.

"On the financial front, we delivered on our commitment to significantly reduce the hedge book, ahead of schedule," Chief Executive Officer Mark Cutifani said.

"The remaining hedge commitments are expected to be smoothed over 8-10 years, targeting a price which is expected to be 6 percent below spot, assuming a spot price of about $900 ounces."

The gold producer raised $1.7 billion through a rights issue to help it trim its forward sales, in a bid to expose its output to the spot price of gold and stem price-related losses.

INFLATION

Inflation drove total cash costs for the quarter up 7 percent to $434 per ounce from the first quarter, but the impact was muted by improved output and processing of stockpiles. Total costs would rise to between $450-$460 per ounce this year.

The spot price of gold averaged 216,742 rand per kilo for the quarter, some 3 percent lower than the preceding quarter's.

Output for the second quarter was up 5 percent to 1.25 million ounces mainly on improved output from South Africa's Mponeng and TauTona and its Geita Gold Mine in Tanzania.

In the third quarter, production would tick up to 1.27 million ounces, while for the full year, the company expects between 4.9 and 5.1 million ounces, barring power supply hiccups in South Africa, from 5.5 million ounces in 2007.

AngloGold agreed to issue shares worth $70 million to Brazil's Eldorado Gold Corp to buy its unit Sao Bento Mineracao SA that owns a mine that could boost AngloGold's output by 200,000 ounces in the future.

AngloGold, which has around 21 operations across four continents, said South African output rose except for its Great Nolingwa mine, where there safety problems. Its operations in Australia, Argentina and Ghana produced less gold, but the company managed a turnaround at Geita, while Mali and Brazil output increased. (Editing by Paul Bolding)

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