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Anglogold Ashanti’s cashflow surge on the record gold price

AngloGold Ashanti, has reported free cash flow generation of $177 million (R3,6 billion) during the six months ended June compared to an outflow of $31m in the same period last year as it rode the wave of the gold price.

Gold touched the record $2 000 an ounce level on Tuesday as investors scrambled for safe-haven assets helping to lift the fortunes of gold producers.

Anglogold Ashanti the world’s third-biggest gold producer, said of $177 m, $173m was generated in the second quarter of the year and this was despite production Covid-19 related disruptions that affected output mostly at its South African operations.

Commenting on the results, outgoing chief executive, Kelvin Dushnisky, said: “While the recent rally in the gold price is welcome, tight cost and capital management will continue to be the key focus areas for us as we work to capture this widening margin and increase reserves.”

AngloGold Ashanti announced Dushnisky’s sudden resignation last week, nearly two years after his appointment. The company said it had appointed chief financial office Christine Ramo as interim chief executive.

The group said free cash flow before growth capital, the metric on which dividends are calculated, rose 376 percent – or nearly fivefold – to $324m compared to $68m for the same period in 2019.

However, the group said cash flows were impacted by VAT that continued to be locked up at Geita, a mine in Ghana and Kibali in the Democratic Republic of the Congo (DRC) a mine it jointly operates with Barrick Gold, with balances owing at the end of June 2020 of $131m and $71m respectively.

“At the end of June 2020, the company’s attributable share of the outstanding cash balances awaiting repatriation from the DRC amounted to $293m. Barrick Gold, the operator of the Kibali joint venture, continues to engage with the DRC government regarding the 2018 Mining Code and the cash repatriation,” said the company.

Production in the six months ended 30 June 2020 was 1.46 million ounces at a total cash cost per ounce of $810 an ounce. The company said 85 000 ounces were impacted by the adverse impact of the Covid-19 pandemic, of which 63 000 ounces related to the South African operations.

The company said that second quarter production increased 5 percent over the first quarter of 2020, rising to 753 000 ounces from 716 000 ounces. Quarter-on-quarter production improvements were recorded at Sunrise Dam, Serra Grande, Iduapriem, Obuasi, Geita, Siguiri and Cerro Vanguardia (CVSA).

The group said net debt decreased by 18 percent to $1.42 billion at 30 June 2020, from $1.739bn at 30 June 2019. “In order to safeguard the balance sheet during the Covid-19 pandemic, the Company took proactive steps to further bolster liquidity. As at 30 June 2020, the Company’s liquidity remained strong with approximately $2.47bn available, including cash and cash equivalents of $1.29bn,” said the group.

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