AngloGold Ashanti’s Q2 boosted by Ghana tax cut

JOHANNESBURG – The world’s second-biggest gold producer, AngloGold Ashanti Ltd, posted strong adjusted second-quarter earnings yesterday, boosted by a large tax benefit in Ghana and a recovery in its big mine there.

Analysts said they were pleasantly surprised by a drop in overall costs and higher production at the Obuasi mine in Ghana, which the group has been struggling to turn around. “Generally I think it’s a positive set of results …the most important thing is that Obuasi seems to be on the bounce back, much stronger than most of us expected,” said analyst Leon Esterhuizen at Investec Securities.The firm, majority owned by Anglo American, acquired Ghana’s Ashanti Goldfields last year for US$1,44 billion (N$9,6 billion).Headline earnings per share, adjusted for non-realised changes in derivatives, jumped by 30 per cent, but a large portion of this was due to a tax cut in Ghana.Adjusted gross profit – gold income minus cost of sales – rose four per cent, it added.In dollar terms, a tax cut in Ghana to 25 per cent for three years accounted for US$35 million, or 38 per cent of adjusted headline profits of US$92 million, a statement said.AngloGold Ashanti said adjusted headline EPS for the three months to the end of June climbed to 228 South African cents from 175 cents in the previous quarter.The average forecast of eight analysts surveyed by Reuters for adjusted EPS was 189 cents.But the estimates were in a wide range of 95 to 279 cents, with analysts divided on whether distorting tax issues and restatements that appeared in the first quarter would emerge again.AngloGold shares, which have gained 14 per cent this year, had risen 0,3 per cent to 228 rand by 1050 GMT, largely in line with a 0,5 per cent rise in the blue chip top 40 index.AngloGold Ashanti, which has been battling to contain costs, said total cash costs fell two per cent to US$278 per ounce.Chief Executive Bobby Godsell told a results presentation the group achieved US$61 million in cost savings so far this year and was on track to increasing that to US$112 million by year-end.But soaring oil prices and contractor charges threatened its goal of cutting group cash costs to US$273 per ounce by year-end.”Some of the progress we are making on the cost management side will be offset by continued margin pressure,” he said.”Our goal of US$273 per ounce remains a stretched target.We’re absolutely committed to doing everything we can to achieve it, but it’s clearly going to be tough.”The group’s second-quarter gold output was unchanged from the previous quarter at 1,569 million ounces, but production at Obuasi in Ghana gained 11 per cent to 102 000 ounces.Another star was Siguiri in Guinea where a new processing plant helped raise output by 86 per cent to 80 000 ounces.Geita in Tanzania, however, suffered from a temporarily disruptive move by Anglogold to assume management of the operations from a contractor, with output falling 14 percent and total cash costs soaring by 55 per cent.Godsell said improvement there was not expected until early next year.AngloGold forecast that production in the third quarter was expected to fall slightly to 1,551 million ounces at an average cash cost of US$279 per ounce.The company also said its net hedge position – representing gold sold in advance at fixed prices – fell by 400 000 ounces to 10,32 million ounces quarter on quarter due to the maturing of price contracts.- Nampa-Reuters”Generally I think it’s a positive set of results …the most important thing is that Obuasi seems to be on the bounce back, much stronger than most of us expected,” said analyst Leon Esterhuizen at Investec Securities.The firm, majority owned by Anglo American, acquired Ghana’s Ashanti Goldfields last year for US$1,44 billion (N$9,6 billion).Headline earnings per share, adjusted for non-realised changes in derivatives, jumped by 30 per cent, but a large portion of this was due to a tax cut in Ghana.Adjusted gross profit – gold income minus cost of sales – rose four per cent, it added.In dollar terms, a tax cut in Ghana to 25 per cent for three years accounted for US$35 million, or 38 per cent of adjusted headline profits of US$92 million, a statement said.AngloGold Ashanti said adjusted headline EPS for the three months to the end of June climbed to 228 South African cents from 175 cents in the previous quarter.The average forecast of eight analysts surveyed by Reuters for adjusted EPS was 189 cents.But the estimates were in a wide range of 95 to 279 cents, with analysts divided on whether distorting tax issues and restatements that appeared in the first quarter would emerge again.AngloGold shares, which have gained 14 per cent this year, had risen 0,3 per cent to 228 rand by 1050 GMT, largely in line with a 0,5 per cent rise in the blue chip top 40 index.AngloGold Ashanti, which has been battling to contain costs, said total cash costs fell two per cent to US$278 per ounce.Chief Executive Bobby Godsell told a results presentation the group achieved US$61 million in cost savings so far this year and was on track to increasing that to US$112 million by year-end.But soaring oil prices and contractor charges threatened its goal of cutting group cash costs to US$273 per ounce by year-end.”Some of the progress we are making on the cost management side will be offset by continued margin pressure,” he said.”Our goal of US$273 per ounce remains a stretched target.We’re absolutely committed to doing everything we can to achieve it, but it’s clearly going to be tough.”The group’s second-quarter gold output was unchanged from the previous quarter at 1,569 million ounces, but production at Obuasi in Ghana gained 11 per cent to 102 000 ounces.Another star was Siguiri in Guinea where a new processing plant helped raise output by 86 per cent to 80 000 ounces.Geita in Tanzania, however, suffered from a temporarily disruptive move by Anglogold to assume management of the operations from a contractor, with output falling 14 percent and total cash costs soaring by 55 per cent.Godsell said improvement there was not expected until early next year.AngloGold forecast that production in the third quarter was expected to fall slightly to 1,551 million ounces at an average cash cost of US$279 per ounce.The company also said its net hedge position – representing gold sold in advance at fixed prices – fell by 400 000 ounces to 10,32 million ounces quarter on quarter due to the maturing of price contracts.- Nampa-Reuters