For the remainder of the year, AngloGold Ashanti will continue its reinvestment programme as it pursues key growth-driven brownfields projects across the portfolio. Key risks facing the business include the continued spread of COVID-19, higher-than-normal employee turnover rates and inflationary pressures.
AngloGold Ashanti is working closely with its employees on retention of critical skills, as well as strengthening the necessary training and graduate programmes for succession planning. Inflationary pressures are becoming evident, and the business is working proactively to mitigate this impact through its Operational Excellence programme and the introduction of the new Operating Model in 2022.
Cumulative inflation for the current year to date is estimated to be around 5% for the Group as a whole, predominantly driven by the current level of the Brent crude oil price, higher freight and logistic costs, higher steel and heavy equipment pricing, some bulk consumable pricing and competition for scarce resources, particularly labour in key jurisdictions including Brazil and Australia.
The company continues to proactively monitor global supply chains to maintain resilience and continuity of supply and did not have any material negative impacts in the third quarter of 2021 relating to shortfall in supply.
Due to the company’s strategic partnerships on global spend categories, as well as stocking strategies at its operations, it has benefitted from a delayed inflation impact, however, it has increasingly seen cost increases in the third quarter of 2021 and anticipates continued pressure throughout the remainder of 2021 and into 2022.
The Company’s tailings facilities in Brazil are currently being converted to dry-stacking operations in advance of the decommissioning of its existing TSFs in Brazil. This programme, which is taking place amidst the COVID-19 pandemic leading to increased competition for skills and engineering resources, has resulted in an increase in the investment planned to complete the conversion by the legal deadline.
The company currently estimates that the capital expenditures required in 2021 to implement this new technology will not exceed $150m. Capital expenditures for this work during the period 2022-2025 are expected to be material but, based on preliminary estimates to date, the company anticipates that annual expenditures for each of these years will be significantly less than in 2021 and will decline over time.
Group guidance, which was revised earlier this year, remains on track with production at 2.45Moz to 2.60Moz, tracking at the bottom end of the range; total cash cost of $890/oz to $950/oz and AISC of $1,240/oz to $1,340/oz, both tracking at the top end of the range; and capital expenditure of $1,030m to $1,190m.
The revised guidance does not include any production contribution from Obuasi for the second half of 2021 as underground ore will only be used to replenish the run-of-mine stockpile after restarting underground ore mining in mid-October 2021.
Revised guidance excludes any impact on production and costs relating to the COVID-19 pandemic. For the year to date, the COVID-19 impact on production and AISC was estimated at 47,000oz and $43/oz, respectively (including $20/oz related to estimated additional cost impacts and $23/oz related to estimated lost production).
Production, cost and capital expenditure forecasts include existing assets as well as the Quebradona and Gramalote projects that remain subject to approval, Mineral Resource conversion and high confidence inventory. Cost and capital forecast ranges are expressed in nominal terms. In addition, production, cost and capital expenditure estimates assume neither operational or labour interruptions (including any further delays in the ramp-up of the Obuasi Redevelopment Project), or power disruptions, nor further changes to asset portfolio and/or operating mines (except as described above) and have not been reviewed by its external auditors.
Other unknown or unpredictable factors could also have material adverse effects on our future results and no assurance can be given that any expectations expressed by AngloGold Ashanti will prove to have been correct. Measures taken at its operations together with our business continuity plans aim to enable its operations to deliver in line with company’s production targets.
Actual results could differ from revised guidance and any deviation may be significant.