AngloGold posts profits before writedowns

Denver — While gold production edged up and costs declined slightly in the fourth quarter, AngloGold (AU-N) recorded a profit of US$84.6 million before a writedown of US$92.9 million. The net loss for the 3-month period amounted to US$17.6 million (or 16 per share), compared with a net income of US$55.2 million (52 per share) in the corresponding period of 1999.

For the year, AngloGold reported a net income of US$165.8 million ($1.55 per share), compared with net earnings of US$434.2 million ($4.41 per share) in 1999.

Gold production hit 1.86 million oz. in the fourth quarter, up 2% from a year ago, whereas output for the year amounted to 7.24 million oz., up from 6.92 million oz. in 1999.

The South African company generated US$564.6 million in revenue during the recent quarter and US$2.3 billion in all of 2000. It realized a gold price of US$289 per oz. in the fourth quarter, down from US$300 a year ago, whereas the average realized price for all of 2000 was US$308 per oz., down from US$315 in 1999.

Total cash costs in the quarter were US$197 per oz., down from US$209 a year earler. Total production costs were US$226 per oz.

For 2000, total cash costs averaged US$213 per oz., on par with 1999. Total production costs were US$245 per oz.

Because of the low gold price, AngloGold’s operations have been put under intense pressure to hold down costs. The company lowered the carrying value of several operations to reflect the actual cash-generating capacity at current prices. The writedown, totalling US$92.9 million (6% of the company’s net asset value), affected the Jerritt Canyon mine in northern Nevada, where AngloGold holds a 70% interest, and the Ergo and Elandsrand mines in South Africa. The asset review also resulted in a 10% decrease in gold reserves.

At the beginning of 2000, AngloGold identified five problem mines in South Africa. By the fourth quarter, two of these, the Great Noligwa and Tau Tona operations, had been turned around; they are now performing at or above expectations. The company agreed to sell the Elandsrand and Deelkraal operations to Harmony Gold Mining (HGMCY-Q) for R1 billion. The transaction should be completed in February. However, the Bambanani and Joel mines continue to disappoint.

The quarter also saw significant contributions from the newly acquired 40% stake in the Morila mine in Mali, which represents 57,000 attributable ounces at a cash cost of US$88 per oz. AngloGold paid US$130 million for the interest in the new operation last year from Randgold Resources, which is 61%-held by Randgold & Exploration (RANGY-Q).

The contribution highlights the company’s effort to grow production outside of its home in South Africa. During the year, 25% of production and 33% of earnings came from outside of South Africa.

In Australia, the company received a strong performance from the Sunrise Dam mine. Costs grew slightly to US$152 per oz., though they are still among the lowest-cost producers in Australia. The company recently starting a new layback at the pit, resulting in a 27% increase in the amount of material moved in the quarter.