AngloGold Ashanti Ltd. (ANG), the third- largest producer of the metal, beat first-quarter earnings expectations and approved $1.9 billion of projects to help boost output by as much as 29 percent in about the next two years.
Adjusted earnings excluding one-time items rose 46 percent to $1.11 a share, helped by a $90 million tax credit, from $0.76 in the previous three months, the Johannesburg-based company said in a statement today. The median estimate of three analysts surveyed by Bloomberg was 6.46 rand (81 U.S. cents).
Chief Executive Officer Mark Cutifani plans to spur output to benefit from bullion prices that have gained for 10 straight years. Government safety stoppages in South Africa and a 21-day halt at Ghana’s Obuasi operation hampered his efforts in the quarter, with production of 981,000 ounces missing a target of 1.03 million ounces. Second-quarter output will probably be about 1.04 million ounces, according to AngloGold.
The shares rose 3.6 percent to 272 rand by the 5 p.m. close in Johannesburg. Competitor Gold Fields Ltd. gained 3.3 percent.
Gold may climb to $1,700 to $1,800 an ounce for the rest of the year, possibly breaching $2,000, Cutifani told reporters on a call today. The metal traded at $1,595.31 an ounce in London.
In the second half dividends may be higher than the minimum 1 rand a quarter that the company has offered as guidance, depending on the price of the metal, Cutifani said.
AngloGold approved $1.9 billion of investments for the next five years to expand the Cripple Creek & Victor mine in the U.S. and dig the Democratic Republic of Congo’s Mongbwalu and Kibali mines, adding 500,000 ounces of annual output. It plans to boost production to 5.4 million to 5.6 million ounces by about 2014.
The biggest risk for output growth is from state-ordered safety stops in South Africa, Cutifani said in a speech today in Johannesburg. The country often shuts mines or parts of mines for safety checks to curb deaths, which totaled 123 in 2011.
Safety stops remain an issue of “concern, debate and contestation,” Chairman Tito Mboweni told an annual general meeting in Johannesburg today. Halting entire mines after incidents hurts production, Mboweni said.
Mining deaths in South Africa, the nation with the deepest gold and platinum mines, fell to a record low in April, Mines Minister Susan Shabangu said last week, adding there’s been “a significant improvement on health and safety since the department has intensified the enforcement measures.”
Safety disruptions eased in the past month after talks with the government and there may be “a more constructive process,” Cutifani said. Fifteen people died at AngloGold mines last year.
The company is overestimating forecasts for South African operations, David Davis, an SBG Securities Ltd. analyst, said April 24. AngloGold will probably produce 5.1 million ounces by 2014 and achieve 5.5 million ounces two years later, he said.
“You might get a bit of slide but the risk is measured in months, not years,” Cutifani said by phone, referring to the targets. AngloGold mines about 40 percent of its metal in South Africa, where labor strikes have hampered production. It also operates in most southern hemisphere regions.
The Australian Tropicana project and Cripple Creek deposit have underground potential, Cutifani said, adding the resource of La Colosa in Colombia grew 48 percent to 24.2 million ounces and Guinea and Djibouti may deliver new mines. A doubling of capacity to 500,000 ounces in Guinea may cost $300 million to $500 million, based on a rough estimate, he said.
In Mali, the company has put its Sadiola sulfide project on hold until it has an assurance that commitments on power and other matters from the previous government will be honored by the new authorities following a coup, Cutifani said.
AngloGold’s $335 million bid for First Uranium Corp.’s Mine Waste Solutions is “full and fair” and the company won’t make another offer, he said. A group including Olma Investment Firm and Stratton Enterprises Inc. said last month it was too low.
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