AngloGold Ashanti withstood COVID-19-related disruptions to deliver a solid first half production performance and a surge in free cash flow generation to $177m, most of it coming in the three months to June 2020.
Free cash flow rose to an inflow of $177m for the first six months of the year, compared to an outflow of $31m in the same period last year. Of that amount, $173m was generated in the second quarter of the year. Free cash flow before growth capital, the metric on which dividends are calculated, rose 376% – or nearly fivefold – to $324m.
“The business is in excellent shape – cash flows are extremely robust, demonstrating the significant operating leverage we have to this strong gold price,” Kelvin Dushnisky, outgoing Chief Executive Officer (CEO) of AngloGold Ashanti, said.
“While the recent rally in the gold price is welcome, tight cost and capital management will continue to be the key focus areas for us as we work to capture this widening margin and increase reserves.”
AngloGold Ashanti is investing in the redevelopment of its Obuasi Gold Mine, as well as exploration and ore reserve development to increase its operating flexibility and increase reserves. Interim CEO Christine Ramon will continue to focus on the inward investment programme, with rigorous capital allocation guidelines including leverage and return targets.
Production in the six months ended 30 June 2020 was 1.469Moz at total cash cost per ounce of $810/oz, compared to 1.554Moz at $792/oz for the first six months of last year. Geita delivered an outstanding performance, Serra Grande posted a strong recovery from the first quarter while Kibali, Iduapriem, Tropicana and AGA Mineração delivered steady production.
All-in sustaining costs (AISC) were $1,031/oz for the first six months of 2020, compared to an AISC of $1,002/oz for the corresponding period last year.
The adverse impacts of COVID-19 on production in the first half of the year was limited to an estimated 85,000oz, of which 63,000oz related to the South African operations. AISC were impacted by $53/oz.
Second quarter production increased 5% over the first quarter of 2020, rising to 753,000oz from 716,000oz. Quarter-on-quarter production improvements were recorded at Sunrise Dam, Serra Grande, Iduapriem, Obuasi, Geita, Siguiri and Cerro Vanguardia (CVSA).
Adjusted EBITDA for the first six months of the year increased by 59% to $1.096bn compared to $689m during the first half of last year, helped by a 26% year-on-year increase in the gold price received and weaker local currency impacts.
The Obuasi Redevelopment Project continued to ramp up, delivering 50,000oz in the first half of 2020 despite delays in receiving equipment and the arrival of certain critical skills to the site as a result of lockdowns in various jurisdictions, with Phase 2 ramp-up expected by the end of the first quarter of next year.
The sale processes related to South Africa and Mali continue to progress, with final conditions precedent to be fulfilled, and the decision was taken to retain CVSA.
The first production stope in Tropicana’s Boston Shaker underground mine was fired in June 2020 and the project remains on track to achieve commercial production in the second half of 2020.
The work on the Feasibility Study at the Quebradona project is progressing and is now expected to be completed in the first half of 2021. At the Gramalote project, the joint venture partner, B2Gold Corp expects to complete the Feasibility Study in the first quarter of 2021.