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August 7, 2013 3:17 pm
AngloGold Ashanti unveiled job losses and suspended a dividend payment as the world’s largest gold miners sought to adjust to the falling price of the metal.
The South African miner posted a $2.2bn quarterly loss after a $2.4bn post-tax impairment of the value of its assets in response to lower gold prices. Randgold Resources, a partner of AngloGold in developing one of Africa’s largest mines that is shortly to go into production, avoided writedowns but saw net income for the quarter fall more than 60 per cent.
Gold miners round the world have been forced to acknowledge lower asset values after the gold price fell sharply in the second quarter of the year. For some miners the reduced price is close to or even below their “all-in” cost of producing gold, forcing many to respond by cutting costs and paring back spending on building mines or exploring for new assets.
AngloGold is to cut 800 management jobs, equivalent to 40 per cent of its non-production staff, and will pull back from exploring in more than a dozen countries.
The company also shaved $150m from this year’s capital spending budget, reducing it to just under $2bn.
Srinivasan Venkatakrishnan, chief executive of AngloGold, said: “We’ve taken the decision to prepare our business for a volatile gold price environment where we believe there may be downside risk in the medium term.”
An assumed gold price of $1,100 per troy ounce would be a benchmark for planning, Mr Venkatakrishnan said. The gold price was slightly lower at $1,274 on Wednesday. At the end of last year, it was $1,600.
AngloGold’s net loss compared with net income of $304m a year ago. The company said it would not pay a quarterly dividend and would return to paying twice a year.
Randgold, which is focused on gold mining in west and central Africa, reported quarterly net income of $54m compared with $142m a year ago.
AngloGold and Randgold are partners at the Kibali mine under development in the Democratic Republic of Congo. It should produce its first gold in October.
Hunter Hillcoat, analyst at Investec, said the fall in the gold price was untimely for Randgold at a time when it was increasing its capital spending to develop Kibali.
However, “the company’s operations are still cash generative, as opposed to many of its peer group”, said Mr Hillcoat. Randgold “has no debt and has the ability to gear up” – or increase leverage.
Randgold got a $200m revolving credit facility this year. “While we believe we’re well positioned to cope with the downturn, we felt it would be prudent to buy some insurance in the shape of the [credit facility],” said Graham Shuttleworth, Randgold’s chief financial officer.
Anglogold shares closed down 3.7 per cent at R11,750 in Johannesburg while Randgold shares were off 1.3 per cent at £43.69 in late trading in London.
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