Vancouver — Africa’s biggest gold producers felt the impact of a falling U.S. dollar during the second quarter.
Stronger local currencies against the U.S. dollar in seven of the eight countries in which it operates hampered costs, margins and earnings. The bulk of AngloGold’s production comes from South Africa, where the rand is trading near 3-year highs against the U.S. dollar, affecting South African mining firms, which draw most of their earnings in international currencies but pay costs in rands.
The company produced 2% more gold (1.4 million oz.) in the recent second quarter than in the year-earlier period. However, total cash costs rose 6%, to US$223 per oz., while operating profit fell 4%, to 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 8.7 million oz.
“We expect the company’s prudent management of its hedge book, which declined by a further 610,000 oz. this quarter, to ensure that the price we receive for gold will continue to be close to the dollar spot price,” says CEO Bobby Godsell.
In May, the company offered to buy Ghana-based
The merger has yet to be approved by other shareholders in Ashanti, notably the government of Ghana, which can veto any takeover.
Ashanti was not immune to the rise of the rand in the second quarter as higher costs took a toll on the company’s results. The Accra, Ghana-based company produced 370,978 oz. gold, 8% less than in the corresponding quarter of 2002, while cash operating costs between the two periods rose US$30, to US$222 per oz.
Meanwhile, South Africa’s second-biggest gold producer followed suit by posting a profit of US$93 million in the latest quarter, down from US$112 million a year earlier.
The shortfall is attributed to an 8% rise in the average rand/U.S.-dollar exchange rate and a US$4 drop in the realized gold price, to US$349 per oz.
Revenue amounted to US$383 million on gold sales of 1.1 million oz., compared with revenue of US$397 million on sales of 1.13 million oz. in the previous quarter. The lower gold sales are primarily a result of lower underground grades at the Kloof mine.
Operating costs were US$281 million, compared with US$256 million in the previous quarter, while total cash costs increased to US$255 from US$225 per oz., mainly because of the stronger rand.
Gold production for the recent quarter decreased to 1.04 million oz., from 1.07 million oz. in the previous quarter.
In Australia, increased output at the St. Ives operation propelled production 13% higher. Cash costs for the mine rang in at US$221 per oz., and grades were maintained at 2.9 grams gold per tonne.
Gold production at Agnew was virtually unchanged at 36,000 oz. The total cash cost was US$286 per oz., slightly higher than the US$272 incurred in the previous quarter.
Operations in Ghana saw a 3% drop in output. Total cash costs at Tarkwa hit US$213 per oz., compared with US$202 in the previous quarter; at Damang, they fell to US$223 from US$248 per oz.
For fiscal 2003, gold production increased 5% to 4.3 million oz., compared with 4.1 million oz. in 2002. The increase is the result of the major’s acquisition of the Australian and Damang operations.
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