AngloGold posts improved first quarter

Denver — A solid operating performance by AngloGold (AU-N) improved net earnings to US$43 million (or 40 per share) in the first quarter, compared with a net loss of US$18 million (16 per share) in the fourth quarter of 2000.

Gold production from the world’s largest producer was off slightly from the previous quarter to 1.75 million oz.

The decrease resulted from the sale of the Elandsrand and Deelkraal operations to Harmony Gold Mining (HGMCY-Q).

While the average spot price of gold dropped to US$263 per oz. in the quarter, the price AngloGold received increased 5% to US$295 per oz., due to the company’s hedging policy.

“This underlines the benefits of a responsible hedging program,” says Bobby Godsell, AngloGold’s chairman. The company decreased its hedge book by 800,000 oz. during the quarter.

Operating costs also played a part in the company’s first-quarter performance. In South Africa, operating profit was up 11%. Cash costs were held in rand terms and declined 3% in dollar terms to US$202 per oz. For the company, cash costs world-wide averaged US$193 per oz.

The Bambanani mine turned a R7-million loss in the fourth quarter of last year into a R21-million profit in the first quarter of this year.

With the addition of the company’s 50% stake in the Geita mine in Tanzania, contribution from operations in Africa (excluding South Africa) jumped 47% in the first quarter to 194,000 oz. Operating profit grew 6% from the previous quarter.

Geita contributed 60,000 oz. at US$141 per oz.

The Morila mine in Mali, in which the company holds a 40% interest, pitched in 64,000 oz. at US$90 per oz.

Construction and mining remain on schedule for a June gold pour at the Yatela project, also in Mali. AngloGold owns a 40% stake in the project, which is near the Sadiola mine. Iamgold (IMG-T) controls another 40% and the Mali government holds the remainder.

Over the past three years, AngloGold has focused its attention on growing operations in Africa, but outside of its home in South Africa. The strategy has paid off with production coming from low-cost surface mines.

The company hopes to build on this with continued emphasis on growth. Its board of directors has approved a major expansion at the Cripple Creek & Victor mine in Colorado and has okayed commitments to the Mponeng and Tau Tona operations in South Africa.

At Cripple Creek, the US$194-million expansion should result in another 2.8 million oz. of production.

At Mponeng and Tau Tona, the company has revised the development of the Upper Carbon Leader and Lower Carbon Leader reefs. The shaft depth at Mponeng will stop at the 123 level, instead of at the 135 level as originally proposed.

The new plan, while reducing the estimated production, will increase the rate of return. It will also extend the mine life at Tau Tona, which mines the Lower Carbon Leader, until 2011.

Estimated gold production from Tau Tona is 55 tonnes. Nearly twice that is estimated from Mponeng. The resource below the 123 level will be the subject of further study, says AngloGold.

In all, as an expression of its continued confidence in South Africa’s gold economy, AngloGold has committed R1.2 billion to its operations in that country.

Godsell says AngloGold expects to maintain modest growth in earnings over the next two years.

“From 2003, earnings rise more sharply and large amounts of cash are generated, from which we will repay debt,” he says.