AngloGold hit by currency exposure (July 31, 2003)

Vancouver — South Africa’s biggest gold producer continued to feel the impact of a falling US dollar during the second quarter of 2003.

AngloGold (AU-N) saw net profit slump to US$66 million in the three months ended June30, a 11% drop from the profit tallied a year earlier. Earning per share came in at US$0.30, down from the US$0.33 recorded in the first three months of 2003.

The major is the latest global miner to blame appreciating currencies for eating into revenues. Stronger local currencies against US dollar in seven of the eight countries in which it operates negatively impacted costs, margins and earnings. The bulk of AngloGold’s production comes from South Africa, where the local currency, the rand, is trading near 3 year highs against the US dollar, impacting South African mining firms, which draw most of their earnings in international currencies but pay costs in rand.

The major produced 2% more gold in the three months period to 1.43 million ozs but total cash costs rose by 6% to US$223 per oz, while operating profit was 4% lower at US$140 million.

AngloGold, which is the most hedged of the three major South African gold producers, reduced its hedge book by a further 7% during the quarter to 8.73 million oz.

“We expect the company’s prudent management of its hedge book, which declined by a further 610,000oz this quarter, to ensure that the price we receive for gold will continue to be close to the dollar spot price,” says company CEO Bobby Godsell.

The company declined to say whether it would adjust its offer of 26 of its shares for every 100 Ashanti Goldfields (ASL-N) shares. The proposed offer valued Ashanti, one of Africa’s biggest miners, at US$1.015-billion when AngloGold announced it in May. The takeover of Ashanti would make AngloGold the world’s biggest gold producer with combined annual output of 7.6 million oz.

Higher costs also took a toll on Ashanti’s second-quarter results. The Accra, Ghana-based company produced 370,978 ounces of gold, 8% less than last year, while cash operating costs rose US$30 to US$222 per oz.

AngloGold is a 51%-held subsidiary of Anglo American (AAUK-Q).