JSE-listed AngloGold Ashanti reported a fivefold increase in its full-year dividend payment for the year ended December 31, 2020, and added six-million ounces of new ore reserve, on a gross basis, as it charts a return to growth in the coming years, interim CEO Christine Ramon said on February 22.
In fulfilling a strategic objective to improve direct returns to shareholders, AngloGold declared a full-year dividend of R7.05 compared with a dividend of R1.65 for 2019.
“After several years of rationalising our portfolio, we have a clear and credible path to disciplined, high-return growth. We’ve built a solid balance sheet, which allows us to continue self-funding our capital investment, while rewarding shareholders,” she said.
AngloGold aims to increase its production to between 3.2-million and 3.6-million ounces a year by 2025, compared with the 3.05-million ounces produced in 2020.
Production growth will be driven by the ramp-up of the Obuasi mine, in Ghana, and incremental improvements from existing assets in the next two years.
Meanwhile, AngloGold had embarked on a multi-year initiative at the beginning of 2020 to increase investment in ore reserve development and brownfield exploration.
Ramon acclaimed the progress made in the first year of the initiative, with the programme having yielded six-million ounces of gold – more than replacing depletion from mining and extending the overall reserve life of the company’s portfolio.
These additions included 1.4-million new ounces of ore reserve at the Geita gold mine, in Tanzania, and 1.8-million ounces at Obuasi.
The aim of this investment is to increase the rate of ore reserve conversion, extend the reserve lives of assets, enhance mining flexibility and further improve the knowledge of the orebodies.
This programme was designed to unlock latent value from within the existing portfolio, with incremental investment in sustaining capital.
Ramon noted that AngloGold would continue to deliver on this programme this year.
The company has, since 2013, used surplus cash generated by its mines and the proceeds from the sale of assets in the US, South Africa and Mali, to reduce net debt by more than 80%, to the lowest levels in a decade.
AngloGold also met production and cost guidance for the eighth consecutive year.
FINANCIAL AND OPERATING PERFORMANCE
Basic earnings for the year under review were $953-million, compared with a $12-million loss in 2019.
Headline earnings were $1-billion, compared with $379-million in 2019.
Earnings had benefitted from the higher gold price net of increased profit-related taxes. Free cash flow before growth capital increased by 124% to $1-billion in the period under review, compared with $448-million in the prior year.
AngloGold produced 3.05-million ounces at a total cash cost of $819/oz in 2020, which was 7% lower year-on-year, but in line with guidance.
The reduction was mainly owed to the sale of the company’s remaining South African producing assets, the cessation of mining activities at Sadiola and Morila, in Mali, and the impact of the Covid-19 pandemic.
AngloGold’s all-in sustaining costs (AISC) came in at $1 059/oz in 2020, compared with $998/oz in 2019.
The Covid-19 impact on production for 2020 was estimated at 140 000 oz, or 5%, and its impact on AISC was estimated at $55/oz, or 5%.
The performance for the year was underpinned by a strong performance at Geita.
The Obuasi redevelopment project continued its ramp-up, delivering 127 000 oz in production despite delays in receiving equipment and in the arrival of skilled personnel, critical to the project as a result of Covid-19-related lockdowns in various jurisdictions during the year.
Ramon noted that the balance sheet continued to improve as stronger cash flows helped with the continued reduction in adjusted net debt.
Adjusted net debt for continuing operations declined by 62% to $597-million as at December 31, compared with the $1.58-billion in debt as at December 31, 2019.
In terms of safety, AngloGold recorded six fatalities in 2020, four at Mponeng, in South Africa, and two at Obuasi.
Ramon said the company continues to invest considerable resources in understanding the root causes of all accidents – including high potential incidents, or ‘near misses’ – to prevent reoccurrences.
This year, the company expects to implement an updated safety strategy across its business, with particular focus on the critical controls needed to eliminate what it calls ‘high consequence, low frequency’ events.
Ramon said the company’s response to Covid-19 remains to safely ensure business continuity as it navigates through the pandemic.
“We continue to work hand-in-glove with authorities and local communities in each of our operating jurisdictions – providing not only healthcare support where needed, but also assistance in other areas that are experiencing considerable strain from the pandemic,” she said.
GUIDANCE AND INDICATIVE OUTLOOK
Production for the 2021 financial year is estimated to be between 2.7-million ounces and 2.9-million ounces.
Following the key strategic objectives set out by the company a year ago, related to streamlining the portfolio and reinvestment in assets with high geological potential, AngloGold expects to see an average 2% compound annual growth rate (CAGR) in gold production over the next two years relative to 2020 production from continuing operations.
On a five-year indicative outlook, the company expects to achieve an average 5% CAGR in gold production between 2021 and 2025.
This is underpinned by the company’s ten operating assets, as well as the company potentially moving forward with investments in the Quebradona and Gramalote projects in Colombia.
As a result of these investments, total capital expenditure is expected to increase for 2022 to 2024, before declining, explained Ramon.