Newtown, Johannesburg-based gold company AngloGold Ashanti Ltd. (AU), Monday, posted a third-quarter loss, reflecting mainly hefty losses on non-hedge derivatives and other commodity contracts. Gold income for the quarter increased on 5% higher production. However, AngloGold cut its full-year production guidance again, citing a shaft incident at TauTona mine.
Loss for the quarter widened to R8.13 billion from R190 million a year ago. In US dollar terms, loss was US$1.03 billion compared with a profit of US$58 million for the same quarter a year ago.
Third-quarter net loss attributable to equity shareholders widened to R8.25 billion from R247 million a year ago. In terms of the U.S. dollars, net loss attributable to shareholders was US$1.04 billion or 289 cents per share compared with net income attributable to equity shareholders of US$51 million or 15 cents per share last year.
The company said loss on non-hedge derivatives and other commodity contracts was R11.22 billion or US$1.42 billion compared with gain on non-hedge derivatives and other commodity contracts of R148 million or US$92 million last year.
AngloGold Ashanti's adjusted headline earnings were US$163 million, in line with last quarter's record US$167 million, excluding the cost of hedge buybacks. Including the cost of the hedge buyback, which was reflected in a lower received gold price, the company reported an adjusted headline loss of US$596 million, or US$1.65 a share.
Gold income increased to R8.51 billion or US$1.101 billion from R6.85 billion or US$885 million for the year-ago quarter. Revenue for the third quarter grew to R8.81 billion or US$1.14 billion from R7.21 billion or US$930 million in 2008.
Production rose 5% to 1.187 million ounces, or Moz, in the three months through to the end of September, broadly in line with the company's guidance for the period, with output up 5% on Geita, Vaal River Turnarounds.
Total cash costs were within the guided range at US$534 per ounce, despite the impact of higher wages and power prices in South Africa and stronger operating currencies. AngloGold had estimated third-quarter production at 1.2 Moz at a total cash cost of around US$530 per ounce, assuming an average rand exchange rate of South African Rand 8.10 to the US dollar for the quarter.
Chief Executive Officer Mark Cutifani said, "We continue to make breakthroughs in effecting the turnaround at Geita."
AngloGold said Geita continued its recovery under its new management team, delivering a 32% rise in production to 83,000 ounces for the quarter. The Vaal River mines increased output by 20%. AngloGold Ashanti's wholly-owned Brazilian operations delivered a 23% increase in production to 90,000 ounces and, despite the stronger currency, are now the lowest-cost assets in the group with cash costs of US$333 per ounce.
Cerro Vanguardia in Argentina is the next best performer with production of 47,000 ounces at cash cost of US$336 per ounce.
AngloGold Ashanti said it has invested US$797 million to complete a restructuring of its hedge book at prices significantly below current market prices during the quarter. The company now has hedge commitments of 4.3 million ounces, less than a year's production. It anticipates a decline in this position of 800,000 ounces a year between next year and 2015, when it will be hedge free.
Looking ahead, AngloGold estimates fourth-quarter production at 1.16 Moz, at a total cash cost of US$590 per ounce, assuming an exchange rate of South African Rand 7.50 to the US dollar for the quarter.
AngloGold has suspended underground operations at the TauTona operation for an anticipated two months through the end of the year to conduct an inspection of the steelwork along the mine's shaft system. The decision was a pre-emptive safety measure following an accident recently.
Consequently, fiscal 2009 production outlook is revised down to a range of 4.55 Moz to 4.6 Moz, reflecting ongoing safety efforts and the associated production impact.
At the end of the second quarter, the company had adjusted its full-year guidance to 4.7 Moz - 4.8 Moz from the original target of 4.9 Moz - 5.0 Moz, due to safety stoppages, combined with mill repairs in the first quarter at Geita, and the lower-than-anticipated recoveries from the Cripple Creek & Victor in the U.S.
The company now expects total fiscal cash costs between US$515 per ounce and US$530 per ounce, assuming an average exchange rate of between R7.00 and R7.50 per dollar during the fourth quarter.
Friday, AU closed regular trading session at $37.54 on the NYSE.
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