AngloGold surges back to profit as output rises

JOHANNESBURG Wed Nov 6, 2013 3:00am EST

JOHANNESBURG (Reuters) - AngloGold Ashanti (ANGJ.J), Africa's top bullion producer, surged back to profit in the third quarter due to lower costs and higher production which sent its share price soaring on Wednesday.

Adjusted headline earnings were $576 million compared with a loss of $135 million in the previous three months and bringing its earnings to 148 U.S. cents per share, far ahead of a Reuters consensus from five analysts of 8.2 cents.

In the previous quarter the group posted an adjusted headline loss per share of 35 U.S. cents.

Total cash costs in the three months to the end of September were $809 an ounce, 10 percent better than the preceding quarter, while production leapt 12 percent to just over 1 million ounces, exceeding its own guidance of 950,000 to 1 million ounces.

"AngloGold Ashanti responded swiftly to a sharp drop in the gold price this year, cutting unprofitable ounces from its production base," the company said.

It added that it would continue removing unprofitable ounces from its production base to further improve cash flow.

Ghana is one place where production is battling to make money.

Chief Executive Srinivasan Venkatakrishnan told Reuters in August that the cost structure at AngloGold's flagship Ghana gold mine, Obuasi, was unsustainable and the company was looking to make cuts there.

He told journalists on a conference call after the release of the results that the company would cut 430 jobs at Obuasi.

"One of our major components of costs is around labor, so we've had to restructure the labor in Obuasi including the expatriate content," he said.

But he added that it had all been done in consultation with organized labor in Ghana, an important consideration in Africa at a time when proposed job cuts by mining companies have been met with stiff union and government resistance elsewhere, notably in South Africa and Zambia.

Average gold prices in the third quarter fell 6 percent compared with the previous quarter's average of $1,326 an ounce. The price in rands was down just 1 percent because of the South African currency's decline against the dollar.

AngloGold's share price rose 7 percent in early trade, helping drive Johannesburg's key bourse indices to record highs, before cooling off to 4.6 percent higher up at 155.90 rand by 0751 GMT.

(Editing by David Cowell)