AngloGold Ashanti delivered first-half headline earnings of US$363 million amid a challenging first half of the year, with performance affected by the ongoing COVID-19 pandemic, increased costs, lower realized grades across certain operations, and the voluntary suspension of underground mining activities at the Obuasi Mine following a fatal accident on 18 May 2021.
Headline earnings of US$363 million, or 87 US cents per share, in the first six months of 2021, compared to US$404 million, or 97 US cents per share, in the first half of 2020.
Adjusted net debt declined by 41% year-on-year to $850m on 30 June 2021, from $1.431bn on 30 June 2020.
The Company has declared a dividend of 87 ZAR cents per share (approximately 6 US cents per share) for the six months ended 30 June 2021. Production for the first six months of 2021 was 1.200Moz at a total cash cost of $1,003/oz, compared to 1.323Moz at $770/ oz from continuing operations for the first six months of 2020.
All-in sustaining costs (AISC) were $1,333/oz for the first six months of 2021, compared to $1,002/oz from continuing operations for the corresponding period last year, mainly reflecting higher cash costs, higher sustaining capital expenditure in line with the tailings compliance program and the planned reinvestment objectives in the portfolio, COVID-19 impacts, stockpile movements and lower gold sold. Production for the half-year was impacted by an estimated 42,000oz due to COVID-19.
“AngloGold Ashanti remains focused on its strategy to create long-term value, while maintaining a strong balance sheet and mitigating any financial or operating risks to the business,” Interim Chief Executive Officer, Christine Ramon, said.
“Our reinvestment projects remain on track to improve operating flexibility and access to higher grades. We are also pursuing operating and capital efficiencies over the remainder of the year.”
AngloGold Ashanti’s strategy of improving operating flexibility through investment in Ore Reserve development and Ore Reserve expansion at sites with high geological potential remains a key priority and is reflected by the 33% year-on-year increase in total capital expenditure to $461m (including equity-accounted joint ventures) in the first half of 2021, compared to $346m from continuing operations in the first half of 2020.
This year and next remain transitional ones for the Company, with the higher volumes of waste stripping and underground development accompanied by lower grades and the movements of stockpiles.
The Company expects the mining of lower grades and stockpile utilization to be transitory in nature as the reinvestment program provides improved flexibility and access to higher grades, and as vaccination drives progress across our jurisdictions most affected by COVID-19. Notwithstanding significant pressure on costs related to the tailings storage facilities (TSF) transition in Brazil, this investment is also transitory given the upcoming legal deadline.
Mining activities at Obuasi will remain suspended pending the conclusion of a third-party review of the mining and ground management plans.
On 1 September 2021, Mr. Alberto Calderon will assume the role of Chief Executive Officer of the Company and Ms. Christine Ramon will return to her role as the Company’s Chief Financial Officer.
FINANCIAL PERFORMANCE
For the first half of 2021, the Company recorded a free cash outflow of $25m, compared to an inflow of $177m (which included cash flow from the discontinued South African assets of $35m) in the same period last year. Free cash flow was impacted by lower gold sold, higher costs, and higher taxes paid. At the end of June 2021, the Company’s attributable share of the outstanding cash balances awaiting repatriation from the Democratic Republic of Congo (DRC) was $485m. Free cash flow was further impacted by continued lock-ups of value-added tax (VAT) at Geita and Kibali and export duties at Cerro Vanguardia.
In Tanzania, the Company calculates that net overdue recoverable VAT input credit refunds owed to it by the Tanzanian government increased by $5m during the first half of 2021 to $144m on 30 June 2021 from $139m at 31 December 2020 despite off-setting $22m against corporate tax payments in June 2021.
In the DRC, the Company calculates that its attributable share of the net recoverable VAT balance owed to it by the DRC government increased by $5m during the first half of 2021 to $74m on 30 June 2021 from $69m on 31 December 2020. Adjusted earnings before interest, tax, depreciation and amortization (Adjusted EBITDA) decreased by 15% to $876m in the first half of 2021, from $1,035m in the first half of 2020.
Basic earnings (profit attributable to equity shareholders) for the six-month period ended 30 June 2021 were $362m, or 86 US cents per share, compared to $382m, or 91 US cents per share, in the first half of 2020.
SECOND-QUARTER PERFORMANCE
Production for the second quarter of 2021 was 613,000oz at a total cash cost of $1,006/oz, compared to 693,000oz at a total cash cost of $767/oz from continuing operations for the second quarter of 2020.
AISC was $1,380/oz for the second quarter of 2021, compared to $985/oz from continuing operations for the second quarter of 2020.
The Company generated $67m in free cash flow during the second quarter of 2021 compared to an outflow of $92m in the first quarter of 2021.
BALANCE SHEET
The balance sheet remains in a solid position, with debt falling and ample liquidity of approximately $2.5bn.
The ratio of Adjusted net debt to Adjusted EBITDA improved to 0.37 times on 30 June 2021 from 0.73 times on 30 June 2020.
The Company remains committed to maintaining a flexible balance sheet with an Adjusted net debt to Adjusted EBITDA target ratio not exceeding 1.0 times through the cycle.
SAFETY PERFORMANCE
It is with great sadness that we report two fatalities in the first half of 2021. In February 2021, an employee at the Serra Grande mine in Brazil was fatally injured in a fall-of-ground related incident during blasting preparation activities and in May 2021 an employee at the Obuasi mine in Ghana was fatally injured in an underground sill pillar
failure incident.
AngloGold Ashanti remains strongly committed to improving safety across its global portfolio and is focused on the execution of its safe production strategy.
REVISED GUIDANCE
Group annual guidance for 2021 has been revised as follows: 2.45Moz to 2.60Moz of production at a total cash cost of $890/oz to $950/oz, AISC of $1,240/oz to $1,340/oz, and capital expenditure of $1,030m to $1,190m. Production has been revised to mainly remove the contribution of Obuasi for the second half of 2021.
Economic assumptions for 2021 are as follows: $/A$0.76, BRL5.29/$, AP96.00/$, ZAR14.55/$; and Brent $71/bbl.