AngloGold expects surge in earnings despite output falling

AngloGold Ashanti SENS statement: 

AngloGold Ashanti trading statement for the year ended 31 December 2020

AngloGold Ashanti will release results for the year ended 31 December 2020 (the “Period”) on the Johannesburg Stock Exchange News Service on 22 February 2021.

With reference to the Listings Requirements of the JSE Limited, issuers are required to publish a trading statement as soon as they become reasonably certain that the financial results for the period to be reported on next will differ by at least 20% from those of the previous corresponding reporting period.

Expected Headline Earnings and Basic Earnings – Continued Operations

Shareholders are advised that the Company has reasonable certainty that headline earnings for the Period are expected to be between $962m and $1,037m, with headline earnings per share (“HEPS”) of between US 229 cents and US 247 cents. Headline earnings and HEPS for the comparative period in 2019 were $379m and US 91 cents, respectively.

The total basic earnings from continuing operations (“basic earnings – continuing operations”) for the Period are expected to be between $910m and $982m, resulting in total basic earnings per share from continuing operations (“EPS – continuing operations”) of between US 216 cents and US 233 cents. The basic earnings – continuing operations and EPS – continuing operations for the comparative period were $364m and US 87 cents, respectively.

The expected overall increases in headline earnings and basic earnings – continuing operations for the Period compared to the comparative period were primarily due to the following reasons:

  • The gold price received increased by 27%;
  • Weaker local currencies more than offset inflationary increases across operating jurisdictions;
  • Income from joint ventures, mainly Kibali, increased by $110m (post-tax) or US 26 cents per share; and
  • Care & maintenance costs of $47m (post-tax) or US 11 cents per share incurred at Obuasi in the comparative period were not repeated in the current Period.

The increases in earnings were partly offset by:

Non-cash adjustments

  • The derecognition of the remaining deferred tax assets after the sale of the South African operations to Harmony Gold Mining Company Limited (“Harmony”) of $69m, or US 16 cps in the current Period; and
  • Discounting of the Argentine export duties receivable resulted in a decrease in earnings of $15m (post-tax) or US 4 cents per share.

Other income statement effects

  • Adverse inventory and stockpile movements;
  • Higher taxes, withholding taxes and royalties paid in the Period in most jurisdictions as a result of the higher gold price;
  • Additional losses realised on oil and gold derivatives of $17m (post-tax) or US 4 cents per share when compared to the comparative period; and
  • A Brazilian power utility refund received in April 2019 of $11m (post-tax) or US 3 cents per share not repeated in the current Period.

In addition, basic earnings – continuing operations were favourably impacted in the current Period by a profit of $18m (post-tax) or US 4 cents per share as a result of the disposal of the Company’s interest in the Sadiola and Morila joint ventures. This profit is excluded from headline earnings.

Reconciliation of Basic Earnings (Continuing and Discontinued Operations) to Headline Earnings

The reconciliation of basic earnings from continuing and discontinued operations to headline earnings primarily include the following items that are excluded from headline earnings:

  • A profit of $18m (post-tax) or US 4 cents per share as a result of the disposal of the Company’s interest in the Sadiola and Morila joint ventures;
  • A non-cash impairment reversal of $17m (post-tax) or US 4 cents per share relating to the sale of the South African operations to Harmony; and
  • A loss on the sale of the South African operations to Harmony of $81m (post-tax) or US 19 cents per share.

Operational Performance – Continuing and Discontinued Operations

Production for the year ended 31 December 2020 is expected to be 3.047Moz, compared to 3.281Moz for the year ended 31 December 2019, with the decline in production mainly due to the sale of the South African operations and the impact of the Covid-19 pandemic on production. AngloGold Ashanti delivered a solid production performance for the year, taking into consideration the challenges created by the pandemic. The performance for the year was underpinned by a record year at Geita, and steady performances at Kibali, Iduapriem, Siguiri, Sunrise Dam, and AGA Mineração which helped offset declines in production at Tropicana, Cerro Vanguardia and Serra Grande. The Obuasi Redevelopment Project continued its ramp-up, delivering 127,000oz of production despite delays in receiving equipment and in the arrival of critical skills for the project as a result of lockdowns in various jurisdictions during the year.

The financial information on which this trading statement is based has not been reviewed and reported on by AngloGold Ashanti’s external auditors.

Read also: