JOHANNESBURG (miningweekly.com) – South Africa-based miner AngloGold Ashanti would continue to focus on smaller acquisition opportunities, where it saw true value, CEO Mark Cutifani said on Monday.
Speaking at the group’s second-quarter results presentation, in Johannesburg, he indicated that the company’s exploration and brownfield projects motivated its decision to shift away from bigger acquisitions.
AngloGold’s completion of five small, but high-value-yielding acquisitions over the past four years, including First Uranium’s Mine Waste Solutions mine in South Africa, weas expected to add about 700 000 oz/y to its production profile at about two-thirds of the cost its competitors would pay to build new assets, Cutifani said.
Meanwhile, despite a challenging first quarter, AngloGold Ashanti beat its second-quarter operation guidance with gold production of 1.07-million ounces. The company also reported that its growth projects remained on schedule and within budget.
In South Africa, production for the reporting period grew by 18% to 362 000 oz, at a total cash cost of $779/oz. But local production was still impacted by seismicity, as well as various challenges in the implementation of the company’s business improvement initiative dubbed Project One, and at its projects in the Vaal river region.
However, Cutifani stated that operations were expected to improve throughout the rest of the year, adding that the company was focusing on increasing its development and flexibility to ensure continued sustainable improvement in performance.
“At the same time, grades have been declining in South Africa, so that has added to the challenge. But the guys have done a good job in the second quarter and we expect performance to continue over the next couple of quarters,” he said.
Meanwhile, from a continental point of view, AngloGold Ashanti’s African projects benefited from Project One achieving production of 407 000 oz at a total cash cost of $827/oz, up from 377 000 oz produced in the second quarter of 2011.
Cutifani pointed out that AngloGold Ashanti’s exploration division had yielded five new projects over the past eight months.
“With these new discoveries, not only do we have a great deal of projects coming forward, but on a good margin basis as well,” he enthused.
CFO Srinivasan Venkatakrishnan stated that the company’s two refinancing projects had been implemented successfully.
In July, the company replaced its existing four-year $1-billion revolving credit facility that would have matured in 2014, with a five-year unsecured $1-billion revolving credit facility which matures in 2017 to provide funding for its projects and extend the maturity of its debt.
The group also issued a ten-year $750-million unsecure rated bond at a coupon of 5.124% a year, less than that of its existing bond.
“The proceeds of the bond are now available to meet the group’s cash and capital investment needs, leaving the new revolver largely as a standby credit facility,” Venkatakrishnan noted.
“This strategy to use the new revolve to bridge the convertible required, should potentially significantly reduce the refinancing risks in 2014 and will provide us with the time and flexibility to look at options when the $732-million convertible bond matures for redemption,” he added.