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AngloGold Slashes Exploration Budget, Sees Ghana Turnaround
By Ed Stoddard
19/05/2014
JOHANNESBURG (Reuters) - AngloGold Ashanti, Africa's top gold producer, said on Monday it was slashing its exploration budget to focus on a few key projects and would restructure and lay off staff at its loss-making Obuasi mine in Ghana.
"The problem child in our portfolio is the Obuasi mine. The cash bleed rate is simply not affordable," AngloGold's chief executive Srinivasan Venkatakrishnan, who is known as Venkat, told a media briefing after the company released its first quarter results.
"It consumed $220 million in 2013. And it has consumed $40 million to date in 2014," he said.
Venkat said AngloGold was working with the government and the main mining union in Ghana to cut staff and bring in mechanised methods at the mine, which is over a century old and has long been a pillar of the industry in a country once called the "Gold Coast."
In line with wider industry trends, Venkat also said AngloGold was slashing its exploration budget to $150 to $175 million this year from $400 million in 2013 to focus on a few projects that could deliver "the most bang for the buck."
These include a drilling project in Colombia and exploration blocks in Guinea.
Mining companies have been scaling back exploration in the face of depressed prices, with boardrooms insisting on a reduction in capital spending.
The group reported a rise in first-quarter earnings on Monday compared to the same period last year as it cut costs and lifted production.
AngloGold said adjusted headline earnings for the first quarter totalled $119 million, or 29 U.S. cents per share, compared with $113 million in the same period last year.
Total cash costs for the quarter fell 14 percent to $770 an ounce from the first quarter of 2013 as new, low-cost projects came on line in places such as Democratic Republic of Congo and as the company reduced procurement costs.
Output for the quarter fell to 1.06 million ounces from around 1.3 million ounces in the previous quarter. But year-on-year output rose 17 percent as operations outside of South Africa ramped up.
(Additional reporting by Olivia Kumwenda-Mtambo; Editing by Louise Heavens)
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