UPDATE 4-AngloGold adj earnings up, seeks $1.6 bln via rights
(Adds CEO comment on power crisis, updated share price)
By James Macharia
JOHANNESBURG, May 6 (Reuters) - South Africa's AngloGold Ashanti Ltd (ANGJ.J), the world's third biggest gold producer, posted a jump in earnings and plans to raise around 11.9 billion rand ($1.6 billion) through a rights offer of shares.
The mining group said on Tuesday it would issue about 69.4 million new shares and use the cash to reduce its forward sales and increase exposure to the spot price of gold as well as funding new mines, mine development and exploration.
AngloGold posted 37 U.S. cents in first-quarter adjusted headline earnings per share versus 6 U.S. cents in the prior quarter to end-December, reflecting accounting adjustments and a higher gold price, even as output fell due to a power crunch.
Shares in the group initially fell around 5 percent on fears the rights issue would dilute its shares but recovered as the market digested the results, plans to cut its hedge book and news of a gold find in Colombia.
AngloGold was up 9.26 percent at 287.36 rand in late afternoon trade on the Johannesburg Stock Exchange.
"The market was surprised by the rights issue, and some of the numbers were negative - production was lower, the hedge book is still a big problem, but after wading through the numbers, their new find in Colombia helped the share," Roy Lamb, a trader at Investec Securities said.
AngloGold announced a "significant" find of 12.9 million ounces of gold at its La Colosa project in Colombia.
Adjusted headline earnings for the quarter were $105 million versus $18 million in the previous quarter, which was distorted due to annual accounting adjustments. Higher gold prices and a tax credit after tax cuts in South Africa also boosted earnings.
"Overall, the company's strategy and direction is sound in cutting back the hedge book and reviewing its assets," said Mandla Mapondera at Old Mutual Investment Group in Cape Town.
Output for the first quarter was 1.2 million ounces from 1.37 million ounces in the fourth quarter on power supply woes.
Total cash costs came in at $430/oz, up 6 percent from the fourth quarter following the reduced production.
POWER IMPACT
South Africa's mines were hit by a power blackout as the electricity grid came to a near collapse, forcing their operations to cease for five days in January. Thereafter power utility Eskom [ESCJ.UL] could only supply about 90 percent of mines' needs.
AngloGold now has about 96.5 percent power supply.
At this rate of supply, 2008 output is seen between 4.9 million ounces and 5.1 million ounces, while production for the second quarter of 2008 is estimated to be 1.22 million ounces at an average total cash cost of $464/oz, the group said.
The company said it is working on a plan to make its energy use 15 percent more efficient in the coming years through, among other things, the use of special drilling equipment, and added that it was moving toward full production capacity.
"We believe we pushed all the right buttons in navigating through the (power) crisis," Chief Executive Officer Mark Cutifani said in a presentation to analysts.
Cash raised from the rights issue would be used to trim its hedge book, and fund global exploration projects.
AngloGold, which is 16.6 percent owned by Anglo American Plc (AAL.L) (AGLJ.J), said it had cut its hedge book during the quarter from 11.28 million ounces to 10.03 million ounces.
"The rights issue will substantially reduce our hedge book. We believe in the long-term strong price of gold, and want to bring long-term value to our shareholders," Cutifani said in an earlier presentation.
AngloGold has been losing out on the surging gold price owing to its hedge book -- one of the biggest among its peers -- and expects to earn about $475 per ounce for the rest of 2008 if the spot gold price remains at around $900 per ounce.
The mining group said the average U.S. dollar gold price for the first quarter was $925/oz versus the fourth quarter's average price of $788/oz, but it received a price of $755/oz or 18 percent lower owing to its gold hedge position.
AngloGold said plans to sell off some assets to further cut its gold hedge to about 6.25 million ounces, it added. (Additional reporting by Paul Simao; Editing by Stephen Weeks)
