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AngloGold Ashanti’s Vaal River operation in South Africa.
AngloGold Ashanti (NYSE:AU) (JSE:ANG), the world’s No.4 bullion producer, reported Monday it had swung to a quarterly profit thanks to its international operations, but warned unreasonable wage demands and escalating power costs in South Africa will likely push the country’s industry down the slippery slope.
The company, which is Africa’s largest gold producer, will tell the Johannesburg-based unions how their demands for higher wages will translate into fewer positions and shorten the life of mines, chief executive Officer Srinivasan Venkatakrishnan told reporters on a conference call Monday.
“We cannot have year-on-year discussions on wages without any economic consequences,” he said. “That effectively creates a sunset industry for gold mining in South Africa.”
Venkatakrishnan said the company’s international portfolio, which covers mines in nine countries, was “exceptionally strong” and showed the benefit of Anglo’s diversified portfolio. These operations saw all-in sustaining costs fall 13% to $849 per ounce compared with the first quarter of 2014, while production from ongoing operations was 2% higher year-on-year at 730,000 ounces.
“We’ve continued to focus on delivering real operational efficiencies and tight cost management, while ensuring we benefit from weaker producer currencies and lower oil prices. It shows in these results,” Venkatakrishnan said.
As a result, AngloGold raised adjusted headline earnings to 9 U.S. cents per share from a loss of 29 cents in the three months to end-December.
Production at Anglo’s mines in South African, however, dropped 18% to 239,000 ounces, partly as a result of safety-related interruptions at Mponeng and Vaal River mines.
Overall gold production dropped to 969,000 ounces from 1,055 million ounces a year earlier.
Comments
Rayna Hay
Just who’s wages are so damn crippling? Surly mining companies make account for the rise and fall on production, or the success to find minerals or not! This sounds incredibly hostile and a weak attempt to blame the need for workers and their wages for what is most likely the company squandering opportunity along the way and the lack of flexibility in forward planning e.g. failure to incorporate alternative energy sources etc.