Ashanti triumphs over slow start in first quarter

Denver — Ashanti Goldfields (ASL-N) has overcome a possible production shortfall and posted a strong first quarter.

The company reported net earnings of US$9 million (or 8 per share), compared with a net income of US$6.9 million (6 per share) in the first three months of 2000.

Gold production hit 398,992 oz. in the first quarter, with 381,547 oz. attributable to the company’s account. Cash operating costs averaged US$195 per oz. Total production costs were US$264, well below the gold price of US$325 per oz. realized from the company’s hedging policy. In the first quarter of 2000, cash operating costs were US$197 per oz. Total production costs were US$282 per oz.

Earlier in the year, Ashanti warned that production could be as much as 20,000 oz. below the 380,000-oz. target. Strong operating performances at the Obuasi complex in Ghana and the 50%-held Geita joint venture in Tanzania helped ward off the shortfall.

Gold production at Obuasi was on target at 131,622 oz., though down from 181,164 oz. a year ago. The decline resulted from the shutdown of surface mining. Underground production improved to 615,000 tonnes, up from 587,000 tonnes, while the average head grade rose to 7.9 grams per tonne. As there was no lower-grade surface mineralization to depress the grade, grades in the sulphide treatment plant improved to 7.4 grams per tonne.

Exploration at Obuasi continues to receive encouraging results from drilling below level 50 in the Kwesi Mensah Shaft area and between levels 22 and 26 at Sansu North. Below the 50 level, intercepts included 6.4 metres grading 25.6 grams per tonne, 5.4 metres of 36.1 grams, 4.9 metres of 36.3 grams and 3.4 metres of 24.9 grams per tonne. The core from these intervals contained visible gold in quartz. This kind of mineralization has not been seen since the early days at Obuasi.

In Tanzania, Geita produced at record 120,540 oz. gold, of which 60,270 oz. went to Ashanti. Cash operating costs were US$141 per oz. This was the first time the company reported joint production since AngloGold (AU-N) took control of a 50% interest in the open-pit operation at the beginning of the year. In 2000, AngloGold spent US$205 million in cash and US$130 million in financing to help Ashanti complete construction.

The partners are continuing with exploration at Geita, including an assessment of the underground potential of the Nyankanga resource below the current pit. Nearly 25% of the known resources at Nyankanga are below the planned pit.

Further drilling at the Chipako target, 6 km northwest of the plant, has extended the mineralized strike length. Reverse-circulation results include 57 metres of 2.3 grams per tonne, 34 metres of 3.3 grams and 20 metres of 4.3 grams. The companies expect to produce a resource estimate on this open-pit target once all the results are in.

During the recent quarter, Ashanti embarked on a regional appraisal of the Lake Victoria gold fields.

The company saw strong performances from its other operations in Ghana, Guinea and Zimbabwe.

In Guinea, drilling below the laterite pit at Siguiri returned significant drill intercepts, including 17 metres of 3.7 grams gold and 14 metres of 5.7 grams. Further drilling is planned once mining exposes more bedrock. Core drilling has also located mineralization beneath the planned Kami and Eureka Hill pits.

Ashanti continues to drill around the Freda-Rebecca mine in Zimbabwe.

At the end of the quarter, the mark-to-market value of Ashanti’s hedging policy was US$143 million, based on a spot gold price of US$259 per oz. The company lowered debt levels to US$352 million as a result of the Geita transaction.