AngloGold production up, but cash flow takes a dive

AngloGold Ashanti saw its gold production rise 12% in the first half of this year, but its free cash flow swung into the negatives after a more than 140% decline.

AngloGold released its interim results for the six months ended 30 June 2023 today, which showed a stronger second quarter compared to the first of this year.

The company’s gold production rose to 652,000 oz in Q2 2023 versus 584,000 oz in the previous three-month period.

The company said the stronger second quarter was supported by production and cost improvements across most assets, primarily driven by higher tonnes processed and recovered grades.

Total cash costs improved 2% quarter-on-quarter, and all-in sustaining costs improved 4% quarter-on-quarter.

While production rose significantly quarter-on-quarter, this is only a slight increase when comparing H1 2023 with H1 2022.

The company produced 1.233 million oz of gold in the first half of 2022 and 1.236 million oz in H1 2023.

AngloGold’s profit before tax significantly decreased in the first half of this year compared to the previous year, declining from $407 million (R7.56 billion) to $77 million (R1.44 billion) – an 81% decrease.

The company attributed this to higher operating costs, higher exploration and evaluation costs, and higher environmental provisions for its legacy tailings storage facilities (TSFs) due to new legislation in Brazil relating to emergency response and safety management for TSFs.

It also pointed to an increase in legal and project fees of $16 million (R298.81 million), of which $14 million (R261.30 million) is related to AngloGold’s proposed corporate restructuring.

This decrease was partially offset by higher gold sold and the higher average gold price received per ounce.

These factors also impacted the company’s headline earnings per share, which dropped from $300 million (R5.60 billion), or 71 US cents per share, in H1 2022 to $140 million (R2.61 billion), or 33 US cents per share – a 54% decrease.

AngloGold’s basic earnings (profit attributable to equity shareholders) for the first half of 2023 were $40 million (R747.27 million), or 10 US cents per share, compared to basic earnings of $298 million (R5.56 billion), or 71 US cents per share, in the first half of 2022.

The company’s cash flow was also negatively impacted in H1 2023. Net cash inflow from operations declined by 70% to $293 million (R5.47 billion) compared to the previous year.

The company’s free cash flow swung into the negatives, decreasing from an inflow of $471 million (R8.80 billion) in H1 2022 to an outflow of $205 million (R3.83 billion) in H1 2023 – a 144% decline.

The company attributed this decrease mainly to the legacy payments of $460 million (R8.58 billion) from the Kibali joint venture paid in the first six months of 2022 related to the legacy cash build-up at its Kibali mine. 

The company also said its free cash flow was impacted by continued lock-ups of value-added tax at its Geita and Kibali mines and foreign exchange restrictions and export duties at its Cerro Vanguardia operations.

However, the company said its liquidity and balance remain strong, with overall group liquidity of approximately $2.3 billion (R42.89 billion).

“We’re seeing momentum continue to build at our key assets after a steady start to the year and a much improved second quarter,” CEO Alberto Calderon said. “We’re expecting strong operating improvements in the second half.”

The company declared an interim dividend of 70 ZAR cents per share.