$1.25bn knock for AngloGold

Johannesburg - AngloGold Ashanti reported a $1.25bn impairment against its Obuasi, Geita and Iduapriem assets in a year in which it halved its hedge book, maintained steady production and looked ahead to a period when gold output would remain flat.

During the December quarter, AngloGold recorded an exceptional asset impairment charge of $1.25bn against three mines it acquired from Ashanti Goldfields in early 2004.

"This adjustment, which is of a non-cash nature, is based on assumptions relating to market conditions which include the lower gold forward curve, higher discount rates, higher power tariffs in Ghana and reduced reserves at Geita," CEO Mark Cutifani said in the group's results.

Obuasi is showing signs of recovery after years of under-performance, with a second quarter of increased production.

Obuasi and Iduapriem contributed towards a 9% increase in gold production in Ghana to 155 000 ounces, the bulk of which came from Obuasi.

In Tanzania, the Geita mine, which is receiving special attention, disappointed with a mill breaking down, pushing down production by a third to 52 000 oz and rocketing costs up by a third to $921/oz.

Cutifani told Miningmx at the end of January Geita needed another six months of hard work.

AngloGold, which paid a final dividend of 50 cents (SA), bringing its total payout this year to 100 cents per share, expects gold production for 2009 to be between 4.9 million and 5 million oz. It produced 4.98 million oz in 2008.

The total cash cost is expected to range between $435 and $450/oz. This compares to the 2008 figure of $444/oz, which was an $87 increase year-on-year because of a 9% decrease in annual gold output and increased wages and consumable costs.

March quarter production is seen at 1.13 million oz in a cost band of $440 to $450/oz. December's output was 1.268 million oz at $422/oz.

AngloGold has a budgeted capital expenditure for the coming year of $840m.

AngloGold's hedge book, once the biggest of any gold miner by far, has been reduced by half during 2008 and stands at 5.99 million oz after the company cut another 300 000 oz from its forward sales during the December quarter. It has cut its position by a total of 5.29 million oz during the year.

The effect of the hedge book reduction is that more gold is sold at higher spot prices, but it comes at a high price.

During the December quarter the average price AngloGold received was 13% below the spot price, which was a distinct improvement over the previous quarter's 26% discount to the spot price.

The hedge buy-backs resulted in an adjusted headline loss of $897m, against adjusted headline earnings of $278m in 2007.

- Miningmx.com

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