Bloomberg News

AngloGold Cuts Output Forecast, Switches to Quarterly Dividend

November 09, 2011

Nov. 9 (Bloomberg) -- AngloGold Ashanti Ltd., the largest African gold producer, cut its full-year output forecast by as much as 9 percent and said it is switching to quarterly dividends from six-monthly payments.

Floods in Australia, a drought in Colorado and strike action and safety stoppages in South Africa will reduce gold production to an estimated 4.33 million ounces, compared with an earlier projection of 4.55 million to 4.76 million ounces, the Johannesburg-based company said today.

“The lowering in full-year production guidance is quite a disappointment and will have an impact on earnings,” Mandy la Grange, analyst at Investec Securities in Cape Town, said by phone. Production for the quarter ended September rose 0.6 percent from the previous three months to 1.092 million ounces, AngloGold said today, as it reported earnings.

Constraints on production will curb AngloGold’s ability to benefit from record prices for the precious metal. Gold averaged $1,704.62 an ounce in the third quarter, 13 percent up on the prior three months, and reached an all-time high of $1,921.15 on Sept. 6.

AngloGold, which is seeking to arrest four years of production declines, plans to dig South African shafts to record depths and may open its first mines in Colombia and the Democratic Republic of Congo. It intends to produce about 7.6 million ounces in 2020, excluding acquisitions, the company said on Sept. 26.

‘Prudent Policy’

The gold miner slid as much as 1.2 percent to 375.55 rand Johannesburg and was at 378.95 rand at 2:30 p.m. local time. The FTSE/JSE All Share Index was 1.7 percent lower.

AngloGold declared its first quarterly dividend of 11 cents a share. The distribution will be linked to free cash flows rather than profits, Chief Executive Officer Mark Cutifani said in a presentation in Johannesburg. The company will take into consideration capital spending requirements and the strength of its balance sheet when determining distributions, he said.

The use of free cash flow to determine dividends is “very prudent,” David Davis, an analyst at SBG Securities in Johannesburg, said by phone.

AngloGold expects capital spending of about $1.6 billion this year, and more than $2 billion in 2012, Cutifani said.

Third-quarter profit excluding one-time items increased to a record $457 million, or $1.18 a share, from $342 million, or 89 cents, in the prior quarter, the company said in a statement today.

Aside from higher gold prices, AngloGold benefited from a weaker currency in South Africa, where it produces about 40 percent of its metal.

Analysts covering South African gold producers use earnings excluding one-time items as a performance gauge, and compare consecutive quarters rather than against the prior year.

--With assistance by Janice Kew in Johannesburg. Editors: John Viljoen, Alastair Reed

To contact the reporter on this story: Jana Marais in Johannesburg at jmarais@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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