The miner has posted a net loss of $85-million (R1.3-billion) for the year to end-December‚ compared with a $58-million (R875.5-million) loss the year before‚ as gold production fell 11% and the dollar gold price weakened 8%.
But it has reduced its net debt by almost $1-billion (R15.1-billion) during the course of last year‚ lowering it to $2.19-billion (R33.1-billion) from $3.13-billion (R47.3-billion) .
“We were carrying $1-billion more debt than we liked and we’ve met our target of cutting that. What we are looking at now is how to optimise our interest bill further‚ because by cutting that bill you generate more free cash-flow‚” chief executive Srinivasan Venkatakrishnan said on Monday.
AngloGold has $475-million remaining of a $1.25-billion high-yield convertible bond carrying an 8.5% coupon on its book‚ which it has the option to redeem in July. The bond had attracted interest of $107-million a year‚ but AngloGold made a cash offer to bond holders and bought back $775-million.
It sold its Cripple Creek & Victor Gold Mine in the US for $820-million last year to raise money towards clearing the bond. The sale fed into the gold output drop for the year to 3.947 million ounces‚ compared with 4.436 million ounces the year before.
Analysts identified the rump of this bond as the best portion of debt to remove to bring down interest payments and further strengthen the company’s balance sheet.
But they were also keen for AngloGold to resume dividend payments‚ as the company last rewarded shareholders in the first quarter of 2013.
“If your net debt is lower‚ would you consider paying a dividend ... when should we start pencilling in that dividend?” an analyst at JP Morgan Cazenove‚ Allan Cooke‚ asked at a results session on Monday‚ pointing to the higher gold price and improved cash-flows in AngloGold‚ which recorded $160-million of free cash-flow in its fourth quarter.
AngloGold executives would not be drawn on when dividends would resume.
“We are not locked into a particular number or time‚” Venkatakrishnan said. “It’s obviously a function of where the gold price trends are heading and free cash-flow generation. We are getting closer to dividend distribution as every day goes by.”
Two-thirds of AngloGold’s production is exposed to currencies that are persistently weaker against the dollar in South Africa‚ Brazil‚ Argentina and Australia. But the lower oil price has benefited its open-cast‚ mechanised mines.
Underpinning the improvement in the company’s fortunes would be the recovery of what was a “torrid third quarter from a safety point of view with the loss of life” at South African mines‚ where 112800oz of gold had been unmined because of safety-related stoppages‚ CEO in charge of the South African mines Chris Sheppard said.
“I’m confident we will see a 10% uplift in production for this financial year.”
Local mines generated one million ounces of gold last year – a quarter of AngloGold’s annual output – with lower grades adding to the decline. AngloGold forecast it would produce between 3.6 million and 3.8 million ounces.
The reason for the decline was the first full year of no production from Cripple Creek & Victor‚ as well as the full shutdown of the Obuasi mine, in Ghana which had limited production last year‚ and declining production from the ageing mines in Mali.
On the perennially loss-making Obuasi mine‚ it was looking to complete a feasibility study and agreements with the Ghanaian government to offer potential partners a sound investment package to bring them in to redevelop the mine‚ he said.
Last year, Randgold Resources‚ a partner with AngloGold at two other African mines‚ opted out of a joint venture at Obuasi‚ saying the project did not meet its investment hurdle rates and citing the inability of the Ghanaian government to speedily agree to a fiscal package.
Asked if AngloGold still considered the mine to be a core asset‚ after the setback with one of the smartest gold operators in Africa‚ Venkatakrishnan said: “As managers we have to be completely unemotional with assets ... at the right price and right terms every asset needs to be looked at‚ and Obuasi is no exception.”
Pushed on whether there had been any offers to purchase the mine outright‚ he said: “At various points in time we have‚ but they’ve not progressed to a point of concluding a sale‚ but there’s a lot of interest now in the Obuasi assets‚ even in the form of a joint venture.”