AngloGold lowers costs (May 13, 2002)

Vancouver — In the first quarter, AngloGold (AU-N) felt the impact of the sale of its high-cost mines in South Africa as production dropped 340,000 oz. However, cash costs improved considerably to US$151 per oz.

The improved cash costs are largely attributable to weak currencies in South Africa and South America. Cash costs at the company’s South African mines averaged US$136 per oz, while those in South America came in at US$125 per oz.; the rest of AngloGold’s African operations averaged US$127 per oz.

Production from the South African mines totalled 837,000 oz. during the quarter. The Great Noligwa operation contributed 233,000 oz. at a cash cost of US$100 and a total cost of US$109 per oz., while the Tau Tona mine added 159,000 oz. at US$121 and US$129 per oz., respectively.

Output from the major’s South American mines totalled 102,000 oz., about half of which came from the Morro Velho mine in Brazil.

AngloGold’s Australian production amounted to 116,000 oz. at a cash cost of US$196 per oz., while its North American mines chipped in 95,000 oz. at US$254 per oz., an anomalous jump of 8%.

Overall, the total cost of producing an ounce of the yellow metal was US$188, compared with US$193 in the fourth quarter of 2001.

AngloGold posted a profit of US$71 million (or 64 per share) for the recent quarter.

“In comparison with the first quarter of 2001, earnings have increased by 60% in dollar terms and 134% in local currency [South African rand],” says Chief Executive Officer Bobby Godsell.

The company, which recently lost its status as the world’s largest producer to Newmont Mining (NEM-N), has sold several high-cost mines in the Free State. These sales caused gold production in the quarter to fall to 1.4 million oz., while reducing the cost of producing an ounce of gold by US$8 to US$151.

AngloGold aims to capitalize on the rising gold price by reducing its hedge book. Says Godsell: “In this quarter, we have reduced the book by a further 1.7 million ounces. Whereas at Dec. 31, 2001, we had 60% of our forecast 2002 gold production sold forward, today we have only 32% of the remainder of this year’s anticipated production sold forward.”